People's Capitalism! Ain't it great! BBIGM offering may leave out many small investors
Banks divvying up shares may not have much left for individual investors
By BERNARD CONDON
Associated Press
November 17, 2010
When General Motors finally offers stock to the public on Thursday, small investors will probably be left out.
Pension funds, mutual funds and other big institutions all want a piece of the rehabilitated GM. That means the three dozen banks divvying up the new shares may not have much left for individual investors.
"Wall Street is only begrudgingly involving individual investors," laments David Menlow, founder of research company IPOfinancial.com. The attitude is it's "our ball and our rules."
The most important rule of all: The banks handling IPOs — called underwriters — get to pick who gets the shares at the offering price. And critics say those shares often go to favored clients or potential clients — that is, institutions that pay lots of trading commissions to the banks, not the small fry.
"It's still the good-ole-boys network," says Menlow. "As much as the firms would argue to the contrary, it's still, 'How much business are you doing with us?'"
That the small guy had to rescue the company when it was sick but could get shut out now that it's healthy has rankled some investors. The U.S. government had said it wanted small investors to have an opportunity to invest in the IPO, though it never specified just how many shares would be made available.
Treasury spokesman Mark Paustenbach had no comment on whether an auction was considered for GM or on how many shares will go to individual investors.
Read the full article at:
http://www.msnbc.msn.com/id/40236366/ns/business-autos
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