"Ah, American Capitalism" (#144, Topic B)

The 6/5/06 issue of Barron's has a brief mention of the preceding week's IPO of shares of the Bank of China, which raised US$9.7 billion, "China's largest and the biggest worldwide in six years." In the stock's first day of trading, it jumped 15%. This would be a success story in any publication -- except, perhaps, in Barron's. To show the editors' disdain, the story is headed by "Ah, Capitalism." So be it. According to the People's Daily Overseas Edition, the populace in Hong Kong, among other places, queued for hours for the privilege of buying the stock -- the stock was oversubscribed by about 10 times. It is interesting to note that, during this very same week, there was a well-publicized IPO by a well known US company, Vonage Holdings (VG, a provider of internet telephone service). It offerred 31 million shares at $17 each, raising some $530 million -- about 5.5% of BOC's. The stock, after moving up to $17.25 on the initial trading, promptly turned south, dipping down to $11.52 before recovering to $11.98 at the close on Friday, 6/2, a drop of some 30%. About 4.2 million shares (13.5%) were spoken for (= committed to buy, but with payments yet to be made, perhaps via their monthly bills) by some 10,000 of Vonage's 1.6 million subscribers. These subscribers-cum-stockholders-to-be, on a technicality (they made a commitment to buy without having read the offering prospectus), are now trying to be relieved of this obligation -- and, to be free from assuming this huge loss. The outcome of this is uncertain. Ah, American Capitalism.