This article has me reminiscing about the recent Linked-In IPO; I remember reading that the IPO was offered to favorable clients of the brokerage underwriting the IPO.
I don't know how many "favorable" offerings are presented each year or what their performances are, but if the IPO is purposelessly undervalued to make their clients richer, how does one compete with that? I doubt a $100 or 10k account would draw enough interest to gain access to these "Favorable" offerings.
These favored clients are huge customers like funds. They pay the brokerage millions of dollars just in transaction fees every year.
In this context, an undervalued IPO every once in a while is more like a perk to a valued customer -- it's the equivalent of the bouquet of flowers or bottle of wine a company might send to a regular Joe.
> In this context, an undervalued IPO every once in a while is more like a perk to a valued customer -- it's the equivalent of the bouquet of flowers or bottle of wine a company might send to a regular Joe.
LinkedIn agreed to the IPO price. Presumably they felt that undervaluing the stock had enough PR benefits.
(These stories about the IPO pricing, where LinkedIn gets to be portrayed as honest entrepreneurs ripped off by an evil bank, surely is an additional PR victory they gained from this move.)
A similar example. Suppose you wanted to be an investor in a private company. In many localities you actually can't invest unless you have a certain level of net worth (something I've personally had to deal with at various levels of frustration until I just decided to found my own company).
Everybody says the way to become wealthy is to let money make money for you, but you can find yourself locked out of most of the opportunities where that might happen at a growth percentage to be interesting simply because you don't start with enough money to get in the game.
Everybody says the way to become wealthy is to let money make money for you
I don't think so. I guess it depends on what you mean by "wealthy", but I'd say that's the way to go from "rich" to "super rich".
The way to become wealthy is to spend less than you earn. A lot less. When you have savings on the order of several years' worth of income, then a healthy return is real money. Until then, your budget matters a lot more.
I don't know how many "favorable" offerings are presented each year or what their performances are, but if the IPO is purposelessly undervalued to make their clients richer, how does one compete with that? I doubt a $100 or 10k account would draw enough interest to gain access to these "Favorable" offerings.