IPO Prospectuses Become
Hot Memorabilia at Auction
Dow Jones Newswires
Upset you didn't make any money on that initial public offering that fizzled out? Try auctioning off the prospectus.
A small market is developing for IPO prospectuses, the U.S. Securities and Exchange Commission filings underwriters disseminate to give potential investors information about new companies.
Most valuable are the ones from well-known IPOs. Last year, Martha Stewart Living Omnimedia Inc.'s prospectus sold for $76. That's not bad, considering the actual prospectus comes free. Other hot commodities are prospectuses from World Wrestling Federation Entertainment Inc., Red Hat Inc., AT&T Wireless Group Corp. and United Parcel Service Inc.
Dave Bach, who peddles prospectuses and other financial documents on eBay Inc., said he has had success selling the prospectuses of Krispy Kreme Doughnuts Inc. He sold one for $39.75, though a recent sale fetched just $9.99.
For Mr. Bach, just about every dollar taken in from the auctions is profit. He said he works for a "large West Coast institutional investor" and basically just scoops up the extras his firm gets and, in turn, splits the proceeds with his office's summer or Christmas fund.
Financial Documents As Collectors' Items
Prospectuses are really just the latest in a line of financial-related memorabilia to be popular on the auction circuit, particularly with the growth of active investing in the general public. Stock certificates have long been prized, particularly those from old railroad companies or storied corporations such as Standard Oil.
Their value is often higher as a collector's item than as a security. A share of Planet Hollywood International Inc., the theme restaurant chain that just emerged from bankruptcy protection, is being auctioned for $129.50. One share of Boston Beer Co., the microbrewer that makes Samuel Adams beer, is currently on eBay with an auction value of $35. On the securities market that same share opened for trading Monday at 8 1/2.
At least those stocks have a face value -- though all the items sold at auction technically are sold as memorabilia, to avoid having to comply with securities laws. IPO prospectuses, though, have no security value, mostly because they are supposed to be widely available. In theory, any investor can contact an underwriter, ask for the prospectus and get it at no cost. And, with the growth of the Internet, investors can simply download one of the Web versions, cutting out the need for the printed document.
In an e-mail interview, Mr. Bach, who goes under the eBay moniker of "hotstock1," said that ultimately the SEC will add graphics to its Edgar system, giving more detail to the online offerings, but "people will still want the real McCoy that's issued to people -- just like people continue to read newspapers in this electronic age."
In addition to the online auctions, Mr. Bach said he has also found success placing some prospectuses with private collectors. One collector, Mr. Bach said, has been particularly interested in Internet-related companies that have crashed and burned recently, like Value America Inc.
It is a specialized market, though, and not every prospectus sells. Mr. Bach has two new prospectuses up for auction, from recent hot IPOs Sonus Networks Inc. and ONI Systems Corp., each with a starting bid of $6.
As of early Monday, there were no bidders.
