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Investors seek IPO parity
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August 28, 1996: 9:48 p.m. ET
Group asks brokerage houses to offer small investors piece of the pie
From Correspondent Irv Chapman
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WASHINGTON (CNNfn) - An organization representing small investors is attacking the nation's top brokerage houses, charging that the individual has been shut out of the majority of initial public offerings in favor of wealthy and institutional investors.
In order to attempt to level the playing field, the National Council of Individual Investors petitioned the top 25 stock underwriters to offer 25 percent of each IPO to smaller investors.
IPOs have been a hot issue this year. Investors who got in on Lucent Technology earned a 40 percent return by the end of June. Sterling Commerce gave back 55 percent and Associates First Capital returned 32 percent.
But individual investors had little chance of cashing in on the potential riches.
"I have no access to quality IPOs. They're oversubscribed from the beginning," said investor Michael Ely.
"The only ones I've been able to get are the ones no one really wants," said Ron Tyrell, another frustrated investor.
The council's Gerri Detweiler said the deck is stacked against individual investors, who usually can only get in on the second day of trading, scoring a third or half the gain made on the first day. (129K WAV) or (129K AIF)
The reason is simple: Brokers tip off the clients that earn them the most commission, mainly institutional or wealthy customers. And it's perfectly legal.
"The broker has complete and total discretion as to which customers are going to get allocation of IPOs," said David Menlow, president of IPO Financial Network. "If you're good to your broker, the broker is going to be good to you. And that' s strictly done on the basis of how much in commission dollars you're generating for that broker."
Investors, obviously, can make money without IPOs, but the council advises anyone seeking to get in on the ground floor of a stock should remind their broker of their interest, switch to a firm that underwrites a good amount of IPOs, or buy a mutual fund that loads up on them. 
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