Just a warning, this is a rant, and as such, it is going to be stream-of-consciousness and likely rambling and at times borderline incoherent. That being said, here we go:
The argument today on CNBC (and several other outlets I saw in my twitter stream I don’t have the inclination or patience to read) from several pundits, flapping heads, etc seems to be that because “taxpayers” (if you don’t know why I put that in quotes please stop reading now) bailed out GM, all of that cohort should be given access to the IPO. In the immortal words of the Geico Caveman: “fuh, what?!”
Let me get this straight. Apparently small retail investors are outraged (or at least their self-proclaimed advocates are) that they can’t retain/increase their exposure to the clusterf*ck that is GM? Gluttons for punishment they be, no? My thoughts on GM’s financial, strategic, and operational condition aside, what’s the rationale behind this non-sequitur? There’s a missing link in this argument that I can’t for the life of me comprehend. Given A (…) B seems to be the logic as far as I can tell, similar to the
1. Steal underpants
argument. Seriously, someone please enlighten me why every American with a brokerage account deserves an allocation of GM IPO shares because I really just.don’t.get.it.
Now, on to how things actually work in the brokerage industry because MSM apparently doesn’t realize this. At big brokerage firms (and I imagine the same is true at smaller shops as well), syndicate deals (stock, bond, structured products, whatever) are allocated to clients based on several factors, captured by a firms internal scoring, itself based on factors like how much commissions a client generates, the size of the account, and past participation in syndicate deals. Now, if Treasury doesn’t feel it necessary to include the discount brokerages (Schwab, E-trade, Ameritrade, etc) in the underwriting group, perhaps there’s sufficient demand among clients of the other 15-ish underwriters (including the 2 biggest brokerage firms in the country MSSB and BAML) to sell the deal at a fair price (leaving the definition of that term aside for a second). Just sayin…
Now I’m not saying a Dutch Auction wouldn’t have been a good idea (it likely would have, politically and financially), but there seems to be way too much hate for how this GM IPO is being sold.