US online brokers band together
Three major US discount brokers will form an online investment bank to secure a larger slice of the initial public offerings (IPO) market.
Three major US discount brokers will form an online investment bank to secure a larger slice of the initial public offerings (IPO) market.
According to Dow Jones Newswire service Charles Schwab, TD Waterhouse and Ameritrade will come together in a bid to convince major Wall Street underwriters to allocate a greater share of IPO shares to the new investment bank.
The new partnership is indicative of the lack of impact online investors are having obtaining IPO shares even though online stock trading is regarded as a force by major Wall Street securities firms.
The reason for the lack of impact is most IPOs are still controlled by the major players such as Goldman Sachs, Merrill Lynch and Morgan Stanley Dean Witter, who logi-cally tend to allocate most IPO shares to their best customers, usually larger mutual funds and institutional investors.
Waterhouse president and chief operating officer Frank Petrilli says individual inves-tors have been under represented in the capital formation process.
Ameritrade president and chief operating officer Jack McDonnell says most IPO shares are handed to institutional investors, who are not always the best or most desir-able long-term investors.
Shares in IPO's are keenly sought as they tend to raise sharply after issue and this has been seen with many of the Internet issues routinely doubled or tripled on their first day of trading.
The new bank intends to hire analysts to research companies in the technology and telecommunications sectors since these analysts usually have some influence on which firms get selected as co-managers of IPOs, thus helping those firms get stock for customers.
AUTHOR
Jason Spits
Recommended for you
With an advice M&A deal taking around six months to enact, two experts have shared their tips on how buyers and sellers can avoid “deal fatigue” and prevent potential deals from collapsing.
Several financial advisers have been shortlisted in the ninth annual Women in Finance Awards 2025, to be held on 14 November.
Digital advice tools are on the rise, but licensees will need to ensure they still meet adviser obligations or potentially risk a class action if clients lose money from a rogue algorithm.
Shaw and Partners has merged with Sydney wealth manager Kennedy Partners Wealth, while Ord Minnett has hired a private wealth adviser from Morgan Stanley.
