Chapter 4 - The IPO, June 29-30, 1999 - Episode 2Listen to podcast
hackoff.com Prices 5.00 M Share IPO At $15.00/ShareDOW JONES NEWSWIRES
June 29, 1999 5:33 p.m.
NEW YORK – hackoff.com Inc. (HOFC) priced its 5.00 million share initial public offering at $15.00 a share, in the middle of the offering's anticipated price range, Barcourt & Brotherson said on Tuesday.
The offering's gross spread was $1.05, management fee was 17 cents, underwriting fee was 17 cents and selling concession was 61 cents. Reallowance was a dime.
The offering's settlement date is Monday, July 5.
hackoff.com, Inc. licenses antivirus software to e-commerce websites. The company was founded in 1993.
The company has said it plans to use the offering's proceeds to fund capital purchases, finance increased sales and marketing efforts, to repay debt under its current line of credit, and for other general corporate purposes.
First Canada Bank Corp and Web & Stinger were also listed as underwriters for the offering.
—By James Hoodar, Dow Jones Newswires; 201-555-7002
It is Wednesday morning, June 30, the day hackoff.com opens for trading. Larry Lazard is with Harvey Maklin and Sam Gutfreund at the Barcourt offices in the World Financial Center. There is no trace of the previous evening’s hostility.
“I’ll leave you with Sam,” Harvey says. “He can walk you through the plan for the opening and also take you up to the trading floor if you’d like. It looks good. Good luck.”
“Thanks,” says Larry.
“So,” says Sam, “we have a pretty good book of orders for the open. I think we’ll open about 9:45 when things stabilize a little and it looks right now that we’ll be opening at seventeen or eighteen.”
“Why seventeen or eighteen? Why not sixteen or, better, nineteen?”
“It’s more art than science,” explains Sam. “We try to pick an opening point with as many bids below as there are asks above; that way we sort of balance the buyers and sellers. We also try to pick a place where there are lots of orders we can immediately match. There are lots of people right now who will buy in the sixteen to seventeen range; there are shares for sale in this range.”
“Who are the bastards who’re selling already?” asks Larry. “They’ve got to be the same people who were just begging us for stock last night.”
“It takes buyers AND sellers to make a market,” says Sam. “Don’t take it personally. They bought at fifteen. They haven’t taken delivery or paid for the stock yet. And they’ll have a locked in two or three dollar profit on money they haven’t even spent. That’s not all bad. There is such a thing as a busted IPO, even these days. There are stocks that are lower at the end of opening day than at the beginning. Some people even think that some day this market will crash. And these guys get to bank their profits before they begin.”
“They’re parasites,” says Larry, but he is smiling.
Larry and Sam pour themselves some coffee from a silver pot in the plush conference room. Across from the east-facing room, the rectangular bulk of one of the twin towers of the World Trade Center blocks the morning sun but is surrounded by brilliant blue sky.
Just after 9:30 Sam leads Larry up a couple of flights of stairs to the trading floor. This whole floor of the building is separated by low partitions into several large areas filled by traders at consoles. Each console has four or five wide computer screens stacked in various configurations. The traders’ heads are usually centered between all the screens and they turn quickly from one to the other to track the ebb and flow of the market. Sometimes a trader — usually a young man, sometimes a young woman, rarely over thirty — will lean into one screen to focus on a single event or datum. Most traders have a Bloomberg terminal as one of their screens. The traders hands fly over multiple keyboards and computer mice as if they were playing online games — they never look at their fingers.
The traders usually buzz, but sometimes yell from station to station. They also have some phones that permanently connect them to shadow counterparts somewhere else and other phones with rapid-dial buttons for less frequent connections. They never look out the window; they rarely look up, except at the large screens on the wall, which display still more numbers. One shows the current market averages in New York and a few peripheral cities around the world. One is playing CNBC, another CNNfn.
Sam introduces Larry to Raphael, a trader whose console and chair are on a raised dais. “Raphael is going to open hackoff. He’ll manage the trading, at least for today. He’ll keep things as orderly as he can. The open is a very special skill since orders are all over the lot. No one does it better than Raphael.”
“Let’s take the stock up all day,” says Larry to Raphael.
“Won’t happen,” grunts Raphael. He has hardly looked up from his screens for the CEO introduction.
“What does that mean?” asks Larry, alarmed. “Do you see something bad? Does he see something bad?” Larry asks Sam when Raphael doesn’t answer.
“No. Looks fine, I think,” Sam says peering in at the screens. “He just means nothing goes straight up. It’ll go up; it’ll go down. And we hope it’s up a lot at the end of the day. That’s the way it is.”
“I’m gonna open now at nineteen,” says Raphael to Sam.
Larry starts to ask why the price has been revised up but is drowned out.
Raphael stands to shout to the floor. “Opening hackoff at nineteen!”
Heads turn; fingers fly; phone calls are made; and trading of the public shares of hackoff.com has begun.
“Taking hackoff up to nineteen-and-a-half!” shouts Raphael. Soon 20, 201/2, 21, 211/4, then 201/2 again. Almost a million shares trade in the first half-hour.
“Why is it going down?” Larry asks anxiously.
“More sellers than buyers,” says Sam.
“Why?” asks Larry. “What’s wrong? Why are they selling?”
“They’re traders. They trade. That’s what they do. A minute ago they were buying; now some are selling; then they’ll buy again.”
“Why is Raphael taking the price up and down?” asks Larry, still anxious. “Why doesn’t the stock just trade and the market’ll determine the price?”
“That’s what will happen,” says Sam. “On a normal day, we will just monitor the trading and maybe step in if things get disorderly. But on opening day the stock is still trying to find its price and we have to help it get started. That’s what Raphael does. He’s like a tug getting the stock out of the harbor and off to sea. Can I show you any other parts of the trading area?”
“No,” says Larry. “No, thanks. I just wanted to see it open. I’m going back to the office now.”
Sam shakes hands with Larry at the elevator. “Good luck.”
From the ground floor of the World Financial Center, Larry walks east on the enclosed sky bridge over West Street to the concourse of the World Trade Center. In the concourse, the stock ticker of a retail brokerage shop says:
3000s HOFC 22 ½Meaning that three thousand shares of hackoff.com have just traded at $22.50. Next:
A 100 share lot has traded at $23. Every tenth trade or so is hackoff as is usual with the first day of trading. Larry watches, fascinated, as the stock walks up to 23 ½, 24 ¼, and 25. He tears himself away when it trades back down to 24 ¼.
Larry goes into the cigar store in the concourse and buys himself a large torpedo-shaped Balmoral with a dark Sumatra wrapper and has the salesman cut it for him. He lights the cigar as he emerges into the bright sunlight onto Greenwich Street. His walk down to Wall Street and then East to Broad is interrupted several times by his need to watch each stock ticker he passes for as long as HOFC is going up; he only leaves on down ticks. At the last ticker before his office at 55 Broad Street, hackoff is at 26.