Robert J Samples Loc: Round Rock, Texas

It doesn’t take long to become a little jaded when as a stockbroker you are asked to sell some poor choices of investments, whether funds, bonds or stocks. Usually, these are the results of the firm having made promises to another group and then hope their troops can do a reasonably good job marketing it.

I learned early on when a new offering was announced, if it was something your clients really wanted, you could not have any. If you could have a truck load, you were wise to avoid it! The reason being that mutual fund companies were big customers of the brokerage houses and were responsible for a huge cash flow. If the new issue stock was an expected winner, they wanted it all, and usually got the lions’ share.

However, if it was likely a loser, there would be plenty, enough to go around. This is where the saying, “Let’s put some lipstick on this hog, and see what we can sell!” Now mind you, each broker was responsible for his personal clients, so he could refrain from selling any if he chose not to participate. I learned to stay on the sidelines because a lot of stuff that came down was in the ‘pig category’ and I would not subject my clients to those miseries.

But where the rub came was when you weren’t sure of the quality of an offering. I can remember several times what looked like a pig turned out to be a surprise winner. There were times when news got out prior to the availability of a stock and some of my clients had gotten the message about it and wanted to buy. I would be willing to place their order and wait to see if any were granted. But again, if it was a hot stock, forget getting any. You would have to wait and buy on that stock’s opening trades.

When a hot stock hit the market, it might shoot up in price for a few days, then when the mutual fund companies sold out, you might be able to get in at a reasonable price. Heaven forbit if a broker sold a new issue in less than a year, he would be blocked from any other new issues. But it was a regular practice of the mutual fund companies to do what we were prevented from doing.
Just Sayin…RJS

Robert J Samples Loc: Round Rock, Texas

Perhaps some have heard these terms, like "Green Shoe", or "Red Herring" when dealing with new stocks..

The term "Green Shoe" refers to an additional
amount of stock after the original offiering. It seems that a long time ago, the Green Shoe company asked and got permission to offer more than originally stated.

In the case of the "Red Herring" that refers to a prospectus having some text printed on the edge of the binding in red. That indicates this prospectus is a preliminary copy, and there will be changes in another which will be printed later! Just Sayin....RJS

USAF Major Loc: Sea Bright, NJ

Wasn't until I went to a boutique investment bank in NYC that my hedge fund contacts were appreciated. All of the big name places expected 'their brokers' to peddle whatever stuff and it was mostly crap, limited partnerships weighted against the individual investor. Proud to say I helped a lot of folks make some serious money.

CAVEAT EMPTOR!