Online investment bank Wit Capital (Nasdaq: WITC), which went public on Friday, suddenly has some major competition. On Monday, online investment bank E*OFFERING, which is backed by online broker E*Trade (Nasdaq: EGRP), launched its Web site.
Wit Capital has distinguished itself by offering individual investors access to shares of initial public offering on a limited, first-come, first-served basis. Now E*OFFERING is greatly upping the ante. E*OFFERING plans to offer significantly more shares of IPOs — up to 50 percent of an offering’s shares — to E*Trade’s more than one million customers.
This is the latest sign that the Internet is shifting the balance of power from institutional investors to individuals. Two of the IPOs being featured on E*OFFERING’s site are online insurance marketplace InsWeb and GreenMountain.com , which uses the Internet to sell electricity.
“Through our unique digital platform, E*OFFERING will help transform the financial sector by giving, for the first time, the individual investor a fair shot at getting into a public offering,” Walter Cruttenden III, founder and CEO of E*OFFERING boldly stated.
Companies Warming To Online Investment Banks?
That remains to be seen, but what’s certain is that more companies are looking to online investment banks to raise capital. In fact, some companies are now insisting that a percentage of their public offerings go to individual investors, who are more likely to buy and hold.
“While we are opening up opportunities for individual investors, we also are using the Internet to help companies attract the capital they need to grow by communicating more cost-efficiently and effectively with shareholders and a broader base of potential investors,” Cruttenden said.
E*OFFERING also benefits from the presence of Sandy Robertson, who is funding the company along with E*Trade. Robertson is the founder and former CEO of Robertson Stephens & Co.
Shares of E*Trade climbed 4-3/16 to 41-7/8 on Monday in an overall strong session for technology stocks. Wit Capital, which climbed 5-7/8 to 14-7/8, on its first day of trading Friday, gave back 1-3/16 to 13-11/16.
It’s currently uncertain how much of a powerhouse E*OFFERING will become and how this will affect Wit Capital. All that’s clear is that the battle in the weeks to come between E*OFFERING and Wit Capital, which has Goldman Sachs (NYSE: GS) as a major investor, should be interesting. That much you can bank on.