For Hoku Scientific IPO, see underwriting firms
By Rick Daysog
Q: How can I buy shares in the local high-tech company Hoku Scientific when it begins to sell stock?
A: Hoku Scientific Inc., a Kalihi-based fuel cell technology developer, said last week it plans to sell about 4.2 million shares of its stock to the public for the first time to raise more than $50 million for expansion. The sale will be the first so-called "initial public offering," or IPO, of a Hawai'i company since the late 1990s.
The investment banks that manage IPOs typically find buyers who purchase the shares before they begin trading on the market. Individual investors generally have to wait until the stock begins trading on the market before they can buy it.
That was especially true during the high-tech bubble of the late 1990s. At that time, many investment banks managing IPOs doled out shares to their largest and wealthiest clients, who later were able to profit when the stocks began to trade publicly and the price climbed.
There's no standard for how a company will divvy out its IPO shares, but the general rule of thumb is that the shares become more scarce once an IPO heats up, said Jim Rogers, an O'ahu-based branch manager for Brookstreet Securities Corp.
For example, the Internet search engine Google Inc. insisted that a larger portion of its shares be sold to individual investors in its 2004 IPO, but such cases are rare.
Rogers recommends that investors first do their homework on an issue and ask the investment firms that are managing the public offering to send them a copy of a prospectus. That document will give details about the company's product, its management, the company's track record and what the company plans to do with the money that it is raising.
High-tech companies like Hoku, which makes parts for battery-like fuel cells that convert fuels such as hydrogen into electricity, are going to require more due diligence than a traditional retailer or homebuilder that's going public.
The next step is to set up an account with the underwriting firms and request an allocation from one of the firm's brokers.
In the case of Hoku, the investor should contact the underwriting firms of Piper Jaffray, SG Cowen & Co. and Thomas Weisel Partners LLC. They can be reached at:
The brokers at the investment firms will distribute shares among the firm's clients and if the issue is not oversubscribed, the firm will credit your account with your shares, which could be sold on the public market once the stock begins trading.
If the offering is oversubscribed, you may get a partial allotment or none at all. In the latter case, the investment bank will return your money within 21 days.
Hoku did not respond to questions about the company's IPO, citing SEC rules prohibiting public comment during the offering.
But in its filings with the Securities and Exchange Commission, the company said underwriters have the option to acquire 630,000 additional shares — or about 15 percent of the IPO — should the company's shares become oversubscribed.
The additional shares will allow the investment banks to make more stock available.
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If you have a personal finance question, Akamai Money can help. Send questions to David Butts at dbutts@honoluluadvertiser.com or call 535-2453.
Advertiser Staff Writer
