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The underwriter will usually support the price of the
stock at the original issue price, $20 in this case. If
it is not a hot issue, which this was, the syndicate
will buy back stock at $20 for a limited time. Most
always until a few days after settlement date. Longer
if they do not get hit with more stock than they can
handle. If you expect them to support the stock at
this level, that is not how the game is played. It is
now a free market. If they went short stock to
facilitate the offering, which is probably not the
case, they will cover this position at some time in the
future.
Norman E.
Stan Rubenstein wrote:
>
> This is about Initial Public Offerings.
>
> I recently obtained, strictly via an on-line process,
> hundreds of shares of the DLJdirect tracking stock
> (symbol DIR) at the IPO price, 20/sh, mainly
> because I've been a long time client of DLJ direct.
>
> Although I don't intend to flip or take a short
> term profit (DIR ended Friday at 42/sh) does
> any one in the group know the Rules
> governing support of the stock by the
> underwriting syndicate?
>
> I have a concern that the stock's price
> might plunge once the underwiting syndicate
> terminates its commitment.
>
> However this IPO is unusual in that the lead
> underwriter, DLJ, is the parent company of
> DLJ direct.
>
> Looking for informed opinions.
>
> Stan R.
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