IPOs coming online in a month
After a year's hiatus, Wit Capital launches a service that within a month will allow investors to sign up for IPOs and avoid a brokerage middleman.
Wit said the first IPOs will be available to registered investors, who pay no sign-up fees, within 30 days. Venture capital offerings and online stock brokerage services are due next month, with Wit's oft-discussed Digital Stock Market expected early next year.
Today's announcement reflects Wit's reemergence on the Internet investment scene after a long hiatus. A year ago, Wit announced the purchase of electronic trading software and software developers from the New York-based company Global Trade, saying then that it expected to launch its trading system by the end of 1996.
Wit's launch marks one of the first times IPOs are being offered online, an idea that is being met with cautious optimism by the online investing community. Many brokerages reserve IPO shares only for institutional investors or wealthy individual clients, so Wit's program and others like it let small investors in on opportunities closed to them before.
Regulators in the past have been leery about security and the potential for fraud on the Net, a concern Wit and E*Trade, which last week announced a similar program with investment banker Robertson, Stephens, are trying to address by partnering with established investment bankers.
Wit account holders will be able to invest in initial public offerings from major Wall Street and West Coast firms on a first-come, first-served basis, said Robert Griggs, Wit Capital's director of business development, hinting that the first such IPO may come this week. Last week, E*Trade announced a similar program for its brokerage customers. By contrast, many brokerages reserve IPO shares only for institutional customers or wealthy individual clients.
Wit also plans to offer, perhaps as soon as next month, what it calls "public venture capital offerings," which will allow individual investors to invest in specific companies seeking late-stage venture capital. The VC investments will be registered with the Securities and Exchange Commission, Briggs said.
The VC investments differ from offerings by Technology Funding, which allow investors to buy into the company's venture capital fund for as little as $1,000. Unlike Technology Funding, Wit says investors can choose to back specific companies.
Wit's service will not handle firms seeking startup or seed capital, but will focus on technology, entertainment, and health care companies seeking $5 million to $10 million.
"We have been able to round out our investment banking team and our discount brokerage team, totally reengineered our Web site, and are in the development stages with our Digital Stock market," said Griggs.
But in the last year, Internet-based stock trading has skyrocketed, with online brokerage e*Trade (EGRP) going public, discount broker Charles Schwab doing well with its Web-based eSchwab service, and a flurry of buyouts of online brokerages by established Wall Street firms.
Griggs, however, is confident Wit will maintain an advantage. "We still have a significant lead in positioning being a full-service investment banking service," he said, adding that Wit will use its upcoming online brokerage to support its investment banking business and customers.
The company's private placement service, still unlaunched, will require potential investors to prove they have sufficient net worth to qualify under SEC rules.
The Digital Stock Market will focus on firms now trading on the NASDAQ pink sheets or bulletin boards, Briggs said, where the difference between a seller's price and a buyer's offer can be broad. By cutting out brokers as the middlemen, Wit hopes to allow buyers and sellers to handle transactions within the "spread," as the difference between bid and ask prices is called.