LiveWorld Transcripts

NBCi presents

IPO Financial Network President David Menlow
IPO Investing

July 20, 1999

David Menlow, President of IPO Financial Network, answers questions about IPO investing.

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CNBC: Welcome to CNBC.com's MoneyTalk Live! Our guest today is IPO Financial Network President David Menlow. He's here to take your questions on upcoming IPOs and to help you learn the successful strategies (and avoid the pitfalls) you need to know about investing in the IPO pipeline.

Jrockz: Has the market been oversaturated by the recent onslaught of Internet IPOs? Have Net IPOs reached the end of their wild run?

David Menlow: Yes, the saturation is very noticeable, and is a constant source of worry for us. We feel that the market gyrations in the internet sector are being buoyed up because of the segmentation of the various subsectors within the internet market. We also see that there will be rotation within these various subsectors and that will cause the volatility to be somewhat less than some people expect. We do not expect the end of this wild run to happen for the next year. We do see possibly higher lows and lower highs as this part of the IPO market matures.

Mppp: David, I have an Ameritrade account with a modest account balance. Can an average, beginning trader like me have access to any IPO's coming out?

David Menlow: A very short answer would be no, if you are looking for IPO's at their IPO price. The access for the individual investor is being increased on a daily basis. However, there is far more demand than supply even with the recent surge in the quantity of offerings coming to market. And this surge and demand will not be able to be met with any of the discount online firms offering access to the IPO market.

Chris: After investing in an IPO, how long do you normally hold the stock? In other words, are you trying to make your money on the IPO date and then sell off?

David Menlow: Many investors are looking to just trade the opening print. And by that, I mean the first trade that sometimes seems to be the best trade. IPO's run in a cycle whereby, IPO openings will at times be sponsored and prices will continue upward. They also will get very much ahead of themselves and then later change into the opening trade or the opening day's high as the interim high for the stock. The next cycle would be the opening trade, which will then be a significant sell off after that. And, when the market has had enough of that type of price movement, many of the underwriters will price their deals at better valuations and we start the same cycle all over again. Many investors should pay attention to those cycles, and look to modify their trading stances and flow with the tide of investor sentiment and also the stock price. The average holding period is therefore somewhat transitive

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