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Interactive Broker’s IPO Auction Opens April 16th 9am at Trader’s Narrative

If you’re a client of Interactive Brokers and would like to participate in the IBKR IPO, then click, don’t run, to your Account Management screen. As of this morning (April 16th 2007) 9am EST you will be able to follow a link from there to a new option that will magically appear: Trading Access/IB IPO Auction

If you’re not clear exactly how a Dutch auction IPO offering works, let me offer a simple explanation:

People will bid by requesting a certain number of shares and the price at which they would like to buy those shares. These requests will be added together until all the shares (in IB’s example 20 million) are spoken for. But! Before the buyers are asked to make payment for their shares, the lowest price which allowed for the sale of all the shares will be applied to everyone.

Got that? Yeah, it’s kind of strange. But there you have it.

The auction ends, at the latest, on May 3rd 2007. But because of the nature of the Dutch auction system it could very well end much sooner. Theoretically in one hour! since in that time, all 20 million shares could be spoken for.

The neat thing is that you can strategize. For example, you can bid for 100 shares at $25 each, then bid again for 200 shares for $24 each and again for 1000 shares for $21. But if all your three bids make it in before the 20 million shares are satiated, you’ll have the clearing price applied to the total of your bids! So be careful.

If you are not an Interactive Brokers client (tsk, tsk) you have two choices:

  1. Become a client of IB and then bid
  2. Contact one of the following Participating Dealers:

Fidelity Capital Markets, LaSalle Street Securities, LPL Financial Services, Sharebuilder Securities Corporation, Wedbush Morgan Securities, Wells Fargo Securities, WR Hambrecht + Co and HSBC Securities (USA), Fox-Pitt, Kelton Inc, Sandler O’Neill + Partners, and E*Trade

(The rebel in me loves how the eccentric Thomas Petterfy has thumbed his nose at the establishment on Wall St (Goldman Sachs, CSFB, etc. are nowhere to be seen). Too funny.)

Remember: only bid or participate in the IPO unless after you read the prospectus and understand the idiosyncracies of such a Dutch auction system. For more information, see IB’s IPO page.

And in case you’re under the mistaken belief that Dutch auction IPO’s do not go on to have glorious price appreciation - since they don’t get the first day pop - remember that this is exactly what people said about Google (GOOG).

The chances of IBKR following in Google’s footsteps are very small. But I do think that IB’s IPO will be successful and it will do its investors proud.

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4 Responses to “Interactive Broker’s IPO Auction Opens April 16th 9am”  

  1. 1 Tyro

    I’m really tempted to buy some, not because I’ve given careful consideration to the value of IBKR, but because I’m such a happy customer of theirs that I think/hope/wish IB will have a glorious future. I’m married to the stock before it has even opened - good recipe for a disaster :)

    The “Dutch Auction” system sounds funky, but I think it’s close to how specialists open listed stocks. Let’s say the spec has a big sell order to fill, and a lot of buyers willing to buy different quantities at different prices. The specialist will open it at a level where the buyers and sellers match. Buyers who placed limit orders will get filled at the open price, so you can stagger your buying so that you will get the biggest fill at what you think is a good price.

  2. 2 Kryslon

    “The auction ends, at the latest, on May 3rd 2007. But because of the nature of the Dutch auction system it could very well end much sooner. Theoretically in one hour! since in that time, all 20 million shares could be spoken for.”

    Begging to differ - the WRHambrecht site seems to indicate that the auction will be left open until May 3rd, and then some magic black box will examine ALL bids and figure out who bid high enough to get the 20M shares. At least that’s their description of the “Open IPO” process. Your thoughts?

  3. 3 Babak

    I remember reading that in one of IB’s emails or somewhere ‘official’. Can’t find it now. But I could be totally wrong. In any case, I don’t think you win any advantage by dawdling. Thanks for the comment though :-)

  1. 1 Big Demand for Interactive Brokers (IBKR) IPO | Trading Stocks - Self Investors

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