Wednesday, November 4, 2015

J.P. Morgan and their IPO

I don't trust JP Morgan. I don't trust them because they have plead guilty to rigging just about every financial market there is to the tune of tens of billions of dollars in fines. This recent story makes me think they are about to sell average investors and little guys some major snake oil.

Yahoo - Why J.P. Morgan IPO Access is a Huge Deal for Regular Investors.

When a company decides to "go public" or sell stock on one of the exchanges (like the Dow Jones) they make what is called an IPO or Initial Public Offering. When an IPO is set, the price of the stock is also set. This initial rate may or may not be met; but, usually the stock will increase for the first 90 days or so. For quite awhile now certain large or institutional investors were allowed to buy the stock for the set rate the day before the actual public could buy the stock.

A simple example of this might be In and Out Burger deciding that they want to sell stock in their company. The company decides that they want to raise $100,000,000 and they are going to sell 1,000,000 shares at $100 per share. The day before the shares can be purchased on the stock exchange, certain large investors are allowed to buy the stock at the $100 per share. The next day, when the stock is actually publicly traded it will go up or down depending on demand. It is very common to see the stock raise in value in those first 90 days; but, in the past the average person could not buy the stock prior to the IPO. JP Morgan says that for a $250 investment anyone can now buy prior to the IPO so long as JP Morgan has underwritten the IPO.

Why would JP Morgan, a company that is based on fraud and market manipulation, suddenly let the small investor get in on their game and a game that they reserve for their friends. I don't trust them and you should not either.

No comments: