The Etiquette of Hot IPOs By James J. Cramer 6/13/01 1:33 PM ET

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Did you get any Kraft (KFT:NYSE - news - commentary)? If you were a regular customer who did some business with CFSB or Smith Barney you should have had a shot at getting some.

The distribution of initial public offerings is an extremely sensitive topic, so sensitive that I never wanted to talk about it when I worked at Cramer Berkowitz. I didn't want any of the brokers to think I was using my writings to get more shares of hot issues than I deserved. I also didn't want to influence the prices of the deals by writing about them. I guess you could say, simply, I didn't want to get in trouble.

I still don't want to get in trouble. But I want to tell you about the etiquette of hot deals. Brokers award stock to people who do a lot of business. IPOs are perks. They are gifts. Sometimes you have to do the "bad" IPOs in order to get the good IPOs. It is not a true quid pro quo. It is totally understated. I was never told, "You must do this amount of business to get this much Kraft." I did understand that I was being a greedy scum-sucking pig if I asked for stock when I hadn't done any regular business, let alone IPO business.

When I was a broker, I would go in and fight with syndicate -- always a dangerous game -- for my best clients to keep them happy. I did little to help clients who did not do a lot of business. And if you called me and had never done business with me and you requested stock, I said sorry. The problem is that the distribution system is so fractured. The lead bankers split the stock. Then the stock gets split between institutional and individual investors. And then it gets spread to all of the regional offices. By the time your broker gets his share, the pot has been divvied so many times that he may not have enough to give you! Sometimes all he can do is take from some of his other clients to give to you. Believe me, it gets ugly.

Still, the bottom line is that I write for you, not for "them," so to speak. If you trade frequently, meaning once or twice a week, you probably had a shot at getting some Kraft if you indicated that you wanted some before it heated up. If you waited, even though the deal is big, you might not have gotten anything. It is truly a case-by-case situation.

Random musings: I am on the road today, going to Game Four. So I will not be filing with regularity. I am trying to save my fingers and my voice for the First Union Center!

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