Red Herring: Investor rage gets ugly
Here's the story accordingly to RH... Red Herring:
We get death threats at work from dissatisfied shareholders," says
Matthew Szulik, CEO of Red Hat (Nasdaq: RHAT), whose stock plummeted
from a high of $143 in December 1999 to a low of $5 a year later,
erasing $23 billion worth of market capitalization. "People bought in
when the stock was hot and the movement was hot," Mr. Szulik groans,
"and now they're pissed."...
People traded on whims, gut feelings, and often with no more knowledge
than a company's ticker symbol. So imagine the surprise of these
novices when the stock market -- which had done nothing but go up
since they signed on -- suddenly expected them to share the burden of
$4.7 trillion in losses.
First, lets make this clear. Shares fell from a maximum of $286.25 on
December 9th 1999 to about 10$ today. (There's been a 2:1 split)
Saying that they fell from 1.43$ to 5, is mathematically exactly the
same... but, somehow, the effect is not the same.
Then again, if investors are proved right, they effectively have been
In exchange for the excessive commissions, the complaint alleges, lead
underwriter The Goldman Sachs Group, Inc. and underwriters Credit
Suisse First Boston Corp. and Merrill *, Pierce, Fenner & Smith,
Inc. allocated Red Hat shares to customers at the IPO price of $14 per
share. To receive the allocations (i.e., the ability to purchase
shares) at $14, the defendant underwriters' brokerage customers had to
agree to purchase additional shares in the aftermarket at
progressively higher prices. The requirement that customers make
additional purchases at progressively higher prices as the price of
Red Hat stock rocketed upward (a practice known on Wall Street as
``laddering'') was intended to (and did) drive Red Hat's share price
up to artificially high levels. This artificial price inflation, the
complaint alleges, enabled both the underwriters and their customers
to reap enormous profits by buying stock at the $14 IPO price and then
selling it later for a profit at inflated aftermarket prices, which
rose as high as $56.75 during its first day of trading.
Rather than allowing their customers to keep their profits from the
IPO, the complaint alleges, the defendant underwriters required their
customers to ``kick back'' some of their profits in the form of secret
commissions. These secret commission payments were sometimes
calculated after the fact based on how much profit each investor had
made from his or her IPO stock allocation.
Note: Two other similar suits are pending by other law firms.
Though the amount of losses for Microsoft investors is much greater,
the fact remains that $28 invested in RHAT at its peak are now worth
$1 whereas 10$ invested in MSFT are now worth about 6$ (approx. I
didn't check closely.)
As for the benefits from the beginning of both companies, check:
http://www.veryComputer.com/; (RHAT Chart
In other words, don't trust rhats. The GPL license was not designed
for companies and only Bob Young demented spirit could come up with
such an insane idea as an IPO.
La Masse Critique
Rencontrez Nfertiti, Einstein, Tocqueville, etc.
Le sionisme est aujourd'hui aux juifs ce que le nazisme tait aux Allemands chrtiens.