Most of us remember the General Motors IPO (GM:NYSE). The much sought after deal, but oddly enough, it’s now trading below it’s issue price. Will Chrysler be sought after and then simply trade flat to down after the sizzle of the IPO is gone ?
Well this is another name that has conflicting opinions. Many people who are active in the IPO feel the deal will premium based on pure name recognition. Other bulls have mentioned that Chrysler would be well received when it starts it’s road show. However, with unclear financials, potentially rising gas prices and an uncetain stock market, Chrysler IPO could have it’s work cut out
Chrysler Group CEO Sergio Marchionne mentioned last month that the Chrysler IPO might be moved into 2012. In the past, Marchionne year, he expected the IPO to come in the second half of 2011. However, if this market holds up and demand for new issues continues, Chrysler might want to take jump the gun and graps the advatangeous conditions as soon as they can.
What do you do if the Chrysler IPO does trade in 2011 ? We’ll, I touched on how to get deal stock in a prior entry, but if the roadshow goes well, this will be another one of these deals that institutions scoff up like a hot silver penny stock that just found proven reserves. Much of what is leftover after the institutuins get their piece , will go to the largest retail accounts. However, there should be some scraps left for regular accounts. Even if the deal gets hot, but getting IPO allocations is often more sizzle than steak. Let’s assume shares of Chrysler IPO perform similary to GM on it’s first day of trading and Chrysler trades at let’s say for arguments sake a $3 premium. A typical retail account managed by a larger producing broker, at a quality firm, at most, gives a smaller client 500 shares, usually it’s much less if any. And, I am taking the massive size of the potential Chrysler offering into account. Is a $1500 dollar profit that important to you ? Just to do one trade. There are penny stock scalpers who make that every day trading zombie stocks.
If you want to play the IPO market on a regular basis with your broker, it’s certainly worth it, That usually happens for clients who particpate in several offerings, and not only taking the good deals, but the clunkers too.However, pressuring him to give you stock in something like Chrysler for a quick one time flip might be more trouble than it’s worth. In that instance, it’s almost like the broker is getting pumped and dumped, and can cause undue pressure on your relationship with your financial advisor.
So check out my other IPO blog entry that explains the way the game is played in more detail, and also add Ford (F:NYSE) and General Motors (GM:NYSE) to your list of stocks. They will most likely trade in sympathy with the demand for the Chrysler IPO. Remember, shares of Ford ripped higher in anticipation of the IPO.
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