Proof that IPO's are Speculative?
Location: TMFDeej's CAPS Blog
First let me apologize for not posting much lately. I have been absolutely swamped with personal and professional things to do. They're actually all good things...just time consuming ;).
Here's a tale of an IPO that I actually attempted to get in on...an MLP of course. A couple of days ago I saw on my Schwab account that I actually has the potential to participate in the IPO of Susser Petroleum Partners LP (SUSP). After reading the prospectus and realizing that the yield would be steady, the funds for distribution come from long-term gasoline supply contracts with little to no exposure to commodity prices as well as some long-term land leases, and that it would be approaching 9% at the mid-point of its predicted price I decided to submit what is know as a COTP for the company's IPO (which I believe stands for Conditional Offer To Purchase).
When you submit a request for shares, Schwab asks you a series of questions, including are you affiliated with the company, are you an investment professional, and on and on. At the end they ask you about your investing experience, I picked "expert" of course because self-proclaimed experts are the best kind. Then Schwab asked me my reason for investing in this IPO, there was a list of several options that I could check off. I picked "Growth" and "Income" they seemed like logical reasons to invest in a company. After clicking submit, I was surprised to see that my application to purchase shares was denied because I didn't meet Schwab's criteria when I filled out the questionnaire. Even more interesting, once you are rejected, you cannot reapply without calling someone on the phone. It remembers and blocks future attempts.
Well, being a smart cookie I just switched to one of my five other Schwab accounts and tried again ;). This time I filled out the questionnaire exactly the same way, with one exception...this time under the reason for investing I checked a box that said "Speculation." Poof I was instantly accepted. Hmmmmmm, shouldn't a broker want people to be investing for the purpose of growth or income and not just mere speculation. Silly me.
Any how, I checked the offer several times during the next day. I found out that the stock had officially priced at $20.50, which I was still fine with. All that was left for me to do was to "affirm" my offer and I should have my shares when they began trading today. I checked yesterday afternoon and I was not able to affirm yet. So I logged in first this morning to see a message stating "Your Offer Status: Too Late to Affirm." Really? Did they expect me to check this thing all night long. Don't they know that I had to pick up my new vanities from the store in my in-law's pickup, grab my son from football practice at 8:00 and then do some of my side consulting work :).
Oh well. My hunch was right though. This stock was perfect for a fast flip, I would have been able to get shares at $20.50 and it is currently trading at $22.86 +2.36 (11.51%). It may trade even higher as investors realize what the yield is in the coming months, but I think that I would have just flipped. All of these investors grasping for yield reminds me of a min-dot com bubble where I would just grab shares of any internet IPO I could get my hands on and flip them in a matter of minutes for decent bucks.
This really isn't a big deal, it's not like I was investing my entire net worth in this situation. I was more just finding a way to entertain myself and make a quick few dollars.
Well, that's my interesting (to me at least ;)) story of the day. Thanks for reading everyone. Have a fantastic day!