Why I won't be buying the new GM's IPO

GM IPO Leaves Small Investors Behind


The little guy appears to be losing out on the General Motors initial public offering.

Trading shops like E*Trade(ETFC_), TD Ameritrade (TD_) and Charles Schwab (SCHW_) aren't getting access to the GM public offering, expected to occur next week. Despite 35 underwriters and at least 365 million shares, there isn't enough to distribute to online brokers that cater to small, retail investors.

"We're not participating in the GM IPO because the underwriters we normally work with were very low on the priority list and we wouldn't have been able to get an adequate allotment of shares," Schwab spokeswoman Sarah Bulgatz said in response to questions from TheStreet. "Some IPOs we get, others we don't. It just depends often on how much is available and who the underwriters are and what kind of retail distribution they have."

According to Scottrade, customers can begin trading as soon as stocks are available on the market. As for now, traders can place limit and stop limit orders in advance of the IPO and up to the day of the offering. After the IPO hits the market, all normal online order entries will be automatically enabled.

Similarly, a TD spokeswoman said the company would not be participating either because "we have been informed that we will not receive an allocation of shares." E*Trade was reportedly left out as well.

One reader indicated that Fidelity, which has an online brokerage, was apparently allowing customers to invest in the IPO -- but with an important caveat: A minimum of $500,000 in assets must be invested with the firm. The commenter said it represented "more proof that the small investor is being left out." A spokesman said the GM IPO is listed on its site because the company has a "strategic relationship" with Deutsche Bank (DB_), which is one of the underwriters on the IPO.

  1. I'm just a little shy of half a million!
  2. The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) recommends against IPO's altogether!

It will be interesting to see how GM tracks against Ford

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