Chicago Sun Times
February 28, 2000
BY JESSICA MADORE FITCH BUSINESS REPORTER
It would be nice to be Andrew J. "Flip'' Filipowski's dear friend when his Lisle-based Internet operating company, divine interVentures inc., sells shares to the public next month.
But unless you're friends or family, no individual investor will be able to buy divine shares until they spring to life on the Nasdaq stock exchange under the ticker symbol DVIN.
Divine plans to sell 57.5 million shares for $6 to $8 each, but individual investors should expect to pay a hefty premium in secondary trading after the initial debut: Some stock watchers say the stock could fly as high as $100.
Individual investors could buy the stock at the market price, but frequently, IPO stocks nose-dive soon after the initial runup in the open market.
Divine's IPO managers could raise the offering price from the $6-to-$8 range, but they run the risk of pricing it too high, and the issue may not sell out. That would deprive divine of the $400 million it needs on the offering day and create a huge psychological burden for divine to overcome. A failed IPO could be devastating to divine's credibility.
While individual investors will find it tough to buy into divine at the initial offering, it isn't impossible. Your chances will improve if you're a client at a brokerage house that does business with an investment bank that is underwriting the IPO. CS First Boston is the lead underwriter, with Donaldson Lufkin & Jenrette and Bear Stearns acting as co-managers, assisted by an army of third-tier retailers. You'll also need about $500,000 in your account, and a history of trading at the brokerage.
James Griffin, spokesman for Fidelity Investments, the huge mutual-fund manager, says his firm has offered its best customers a crack at buying IPOs since 1997 through business deals with investment banks, such as Lehman Brothers. When these banks underwrite an offering, they allocate shares to Fidelity, which then sells them to grateful clients.
But there's a catch, and it's a big one. These clients are prohibited from cashing in the stock when it pops up on the first day of trading. Clients must hold the stock for at least 15 days.
Similarly, Filipowski and other insiders selling their equity are prohibited from liquidating their new stock for a long "lock up" period, usually three months after the IPO.
Individual investors might also get IPO action through a mutual fund that specializes in the area. T. Rowe Price sometimes buys into select IPOs, said spokesman Steven Norwitz. But even then, the initial IPO pop is muted by the fund's size, he said.