Insiders Are Primary in Next Wave of Secondary Offerings

Investors, who may not have gotten their fill of last year's hot IPOs, can feast on a buffet of follow-on offerings courtesy of insider shareholders eager to cash in at least a portion of their bounty.

Such investors, however, should be careful their appetite for these offerings doesn't lead them to indigestion.

IPO insiders -- company executives and venture capitalists -- are driving their charges back to market at an increasing rate, often before the 180-day ban on selling shares, known as the lockup period, ends, says one investment banker.

A company that went public in 1999 would consider returning to the market "if it can, primarily because selling shareholders want to put some of the cash in their pockets," says Frank Maturo, an investment banker at Merrill Lynch (MER Quote). On average, shares to be sold by insiders make up about 25% to 35% of recent follow-on offerings. ...