IPO Hedge Fund Position question

G

GatorTrader

I met with an office that gives you capital to buy IPO's, and then you sell the ipo on the day of the opening. So you get allocations from brokers, and then split profits with the firm once you sell.
Has anyone heard of this? Or had any experience?
Doesn't pay a salary, benefits, etc. 1099 pay.
Would you go with this, or a prop trading firm? Both don't require capital. Prop has tape reading, chart patterns, scalping, strategies.
Which is the best route to take? I've been a broker for 7 years. I need a change.
 
Quote from GatorTrader:

I met with an office that gives you capital to buy IPO's, and then you sell the ipo on the day of the opening. So you get allocations from brokers, and then split profits with the firm once you sell.
Has anyone heard of this? Or had any experience?
Doesn't pay a salary, benefits, etc. 1099 pay.
Would you go with this, or a prop trading firm? Both don't require capital. Prop has tape reading, chart patterns, scalping, strategies.
Which is the best route to take? I've been a broker for 7 years. I need a change.
More...

how are you going to get allocations on hot stocks? you have to "know" someone to get hot stocks.
 
Quote from GatorTrader:

I met with an office that gives you capital to buy IPO's, and then you sell the ipo on the day of the opening. So you get allocations from brokers, and then split profits with the firm once you sell.
Has anyone heard of this? Or had any experience?
Doesn't pay a salary, benefits, etc. 1099 pay.
Would you go with this, or a prop trading firm? Both don't require capital. Prop has tape reading, chart patterns, scalping, strategies.
Which is the best route to take? I've been a broker for 7 years. I need a change.
More...

Huh? Be careful that you're not getting stuck with the crap IPOs. Like Vhehn said, the roadshow is going allocate shares to reputable money managers who will in turn get the allocations. Unless this is is some strange division of a large reputable shop you're going to get stuck with crap (read: IPOs whose demand are coming in below what the street is trying to sell it at). Furthermore, if the underwriters find out this is what your shop is doing I would surmise that your source of deals will magically disappear. Just my 2 cents.
 
Good points, it can easily turn into a losers game, you might end up pumping crap IPOs to investors in the classifief section of businessweek
 
You need to cold call brokers to see which brokers are big enough to get you good allocations.
Once you have a network of 5-10 brokers, then they will make you take all of their new issues.
You make money on the big movers and break even on the others. Its a win-win for the broker who makes nice commissions, and win-win for you, because you get ipo's.
Is this a valid way to trade?
 
Quote from GatorTrader:

You need to cold call brokers to see which brokers are big enough to get you good allocations.
Once you have a network of 5-10 brokers, then they will make you take all of their new issues.
You make money on the big movers and break even on the others. Its a win-win for the broker who makes nice commissions, and win-win for you, because you get ipo's.
Is this a valid way to trade?
More...

nope because if they know you will flip the ipo they will cut you off. in the 90s i used to do this. at one time i had 11 different accounts to get ipos.
 
Quote from GatorTrader:

I met with an office that gives you capital to buy IPO's, and then you sell the ipo on the day of the opening. So you get allocations from brokers, and then split profits with the firm once you sell.
Has anyone heard of this? Or had any experience?
Doesn't pay a salary, benefits, etc. 1099 pay.
Would you go with this, or a prop trading firm? Both don't require capital. Prop has tape reading, chart patterns, scalping, strategies.
Which is the best route to take? I've been a broker for 7 years. I need a change.
More...

What firm is this that you met with that gives you capital to buy IPO's?
 
I have heard a similar offer in the past.

If you dont mind sharing, what state did you hear that offer in?

I am not sure about what happens if the stock bombs. Lets say the "Hedge Fund" looses money overall,
A. You will not make any money yourself
B. Do you actually owe money towards the losses (I would immagine you would if an account or sub business was in your name) ???
C. Whose money are you trading.... one individual who owns this "hedge fund" or is it a real fund who uses outside investor funds to invest?


I know that investment banks do not want their IPO's to crash. If the "hedge fund" has a strategy of dumping the stock on the first day, the retail broker whose investment banking side allocated the issue for retail through the firm... may not be allocated these IPO's as easily on the next trade.

D. Would you have to be constantly looking for new brokers to burn up?

E. Has anyone worked for an "IPO Hedge Fund" before who would be willing to explain if this is the case. Also ... was, or is this a profitable position? How profitable?

Anyone have any factual (non opinion) answers for questions A-D
 
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