When the summer IPO calendar was saturated with Internet companies, pundits warned that the dot.com mania was about to hit the wall. And sure enough, by early August, Internet IPOs crashed from the record highs they set in April. By August, deals were being postponed left and right and only the brave, like Red Hat Software, raised capital.
But a shakeout in Internet stocks has not scared traditional stock markets from declaring their interest in going publiceven possibly spinning off their electronic trading assets into e-companies. And its not just stock exchanges that are going public. As this months cover story reports, stock and futures exchanges from London to Chicago are biting the IPO bullet as way to stave off competition from more nimble electronic rivals. See "Eyeing the For-Profit Plunge.".
Yet there is no evidence that an IPO will automatically translate into technological leadership or diminish politics. After all, the London Stock Exchange formed a partnership with the Frankfurt Stock Exchange to create a common trading platform that would trade the top 100 European stocks, but so far they cant seem to agree on who owns the technology or what it will be.
But even as the two largest U.S. stock exchanges ponder IPOs, the online brokers always seem to be 10 steps ahead of the traditional market participants. At press time, E*Trade Group signed an agreement with Instinet Corp. to launch after-hours stock trading in NYSE and Nasdaq stocks. This falls on the heels of Eclipse Trading and Wit Capital. Yet the two largest venues for stock trading, the NYSE and Nasdaq are mulling over the issue while they get past the Y2k problem.
If anything, the recent IPO of Red Hat, a company that sells support and services for the Linux operating system, underscores the commercial potential for an operating system that could pose a threat to Microsofts NT. Despite the August doldrums and the fact that many deals were postponed, Red Hats IPO still bucked the trend. On Aug. 10, the first day of trading, Red Hat stock zoomed from an offering price of $14 a share to a $85.25. Ironically, legions of Linux programmers who support the free software as part of the open source community, werent able to cash in because there wasnt enough supply to go around. See "Public Demand for New Issues Outstrips Supply," p. 54. Though Red Hat reportedly set aside 800,000 shares for distribution via E*Trade for the Linux gurus, many didnt pass the suitability requirements.
Perhaps, when and if the U.S. stock exchanges throw their hats into the IPO ring, they will consider giving a portion of their new issues to the information technology staffers that have made their systems work all of these years and to the operations pros that will be burning the candle at both ends when they finally launch after-hours trading.Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio