First, I'd just like to say thank you for the warm welcome. After reading literally hundreds of emails from my inaugural column last week, the question foremost on everyone's mind quickly emerged: "How can someone like me (a small to midsize trader) get involved in IPOs?"

It occurred to me after seeing this one for the umpteenth time that someone needs to lay out the rules of the game. It is now my mission to pull back the curtain and expose the mystery of the IPO world so that you, "the small to midsize trader," can play ball in the big leagues. So grab your glove and bat -- spring training begins today.

The Key to It All

To start you off on the right foot you need to understand the very underpinnings of the IPO game. It is all about relationships. Any serious IPO flipper will tell you it's about finding and getting to know talented brokers. The broker, you see, has a wide degree of discretion over which of his or her accounts receives IPO shares -- so the broker is the key.

How do you find brokers who are willing and able to give you shares? Easy: Pick up the telephone and call them. But which firms do you call? Here's the plan:

Go through any newspaper or news feed on the Web and pick out a number of recent IPOs that have traded to significant premiums. Make note of the names of the lead underwriters on these deals. You will find that certain names pop up more frequently than others, names like

Bear Stearns


Goldman Sachs


Robertson Stephens


Hambrecht & Quist

, etc. Make a list of the underwriters you find most frequently. This list is the answer to the "which firms?" question.

Now, the branch office you call of any of these firms doesn't matter much. What does matter is who you get on the phone when you do call. Most brokerage offices have a system, called the broker of the day, or BOD, with the brokers rotating to take call-ins from the public. Taking the BOD is a roll of the dice. He or she may be the perfect fit for your needs -- or they may be an ex-shoe salesman fresh out of the latest training class. Rookie brokers are a lot like puppies: They have all the energy in the world but haven't learned their way to the restroom.

A better approach to finding a suitable broker is to call the office and ask to speak to the sales manager. It is the sales manager's job to know which brokers do what kind of business, and which would be best suited to work with a given client. Tell the manager the kind of trading you are interested in, and ask him or her to make an introduction to a broker who has access to IPOs. The sales manager will want to know what other types of business you plan to do. Be upfront about this, especially if you are an active trader or do any other types of investing. This "other business" is your leverage. It's what you bring to the party, and ultimately will determine your success in getting IPO shares.

Once you have been introduced to a broker, be very clear about your interest in buying IPOs. Ask very specific questions about his or her ability and willingness to get you shares in the deals you are interested in. The wrong time to find out that a particular broker has no access to IPOs is after you have opened an account and begun to trade.

Popping the Question

When should you ask a new broker for shares in an IPO? I say right away. Because of the perceived difficulty in getting IPO shares, most people are shy to ask for hot deals right away with a broker they don't know very well. Jump in and ask. It's the only way. You'll probably get turned down the first time, maybe even the second and third times, but keep at it. Remember, the broker has discretion over which accounts get stock. If you are persistent, and assuming you are dealing with a broker who gets stock for his clients, you will wear him down and you'll get an allocation. It may not be big -- in fact, it may be tiny -- but it's a start.

Next week we'll look at the issue of give and take: What the broker wants from you.

The Week Ahead

At first glance, this week looks to be a bit busier than the last with 18 deals (11 IPOs, seven follow-ons) slated to be priced as compared to last week's 13 (eight IPOs, five follow-ons). What you should notice is that several of last week's deals were pushed up to this week. This brings up an important point: The calendar is not carved in stone, and is subject to sudden changes, purely at the whim of the syndicate managers.

Last week the trend for Internet and software deals continued to show strength. Shares of

Sagent Technology

(SGNT:Nasdaq) and

Worldgate Communications

(WGAT:Nasdaq) were well received by the market. Worldgate continues to push even higher, and closed at 43 3/4 Friday.

Here's what is in store for this week:

Ben Holmes is the founder of, a Boulder, Colo.-based research boutique specializing in the analysis of equity syndicate offerings. This column is not meant as investment advice; it is instead meant to provide insight into the methods of new and secondary offerings. As a matter of policy, neither Holmes nor his firm has entered indications of interest in any of the companies discussed in this column. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Holmes appreciates your feedback at