Search Salon

- - - - - - - - - - - -

Recently in Salon Technology

A PC in every pot
When we have free computers in every room, will alternative operating systems like Linux, Be and Amiga rule the world?
By Janelle Brown
[08/19/99]

Column
More on "deep links," journalists and IPOs
Why you don't need lawyers to block links -- and hot reactions to the Chris Nolan story.
By Scott Rosenberg
[08/18/99]

Silicon Follies
Silicon Follies
Chapter 45: The bad news -- WHIP gets whipped by pundits
By Thomas Scoville
[08/18/99]

Fast track
Elon Musk is poised to become Silicon Valley's Next Big Thing. What put him in the driver's seat?
By Mark Gimein
[08/17/99]

Can the Dreamcast save Sega?
Sega wants to lift its market share out of the single digits. Will a cool new console, $100 million in ads and fresh leadership do the trick?
By Moira Muldoon
[08/16/99]

Complete archives for Technology

- - - - - - - - - - - -

- - - - - - - - - - - -

- - - - - - - - - - - -

It did better. Hansen got 400 shares at an offering price of $14 when Red Hat's stock came on the market Aug. 11. He sold 200 shares at $84 each. Hansen planned to hold on to 200 more for the long term. But on Wednesday he came into the office and saw Red Hat dropping to $60. He thought, "The geeks are dumping their shares," and within hours he was out, selling his remaining 200 shares at $70.50. Total profit: $31,000. Red Hat's goodwill, says Hansen, more than covers his plans for a year of graduate school.

Red Hat's affinity program offer has drawn a lot of publicity -- not all of it good, but the company is far from the first to sell offering-price stock to a preferred group. TheStreet.com, an online financial magazine, let 5,000 randomly chosen subscribers buy shares in its offering in May. E-Loan, a mortgage broker, offered shares to every customer who had gotten a loan through the online service.

And that's just a small part of the very recent history of selling shares to your customers. Savings and loans, like California Federal, have sold offering-price shares to their depositors. Notices of an impending IPO have been put in six-packs of beer. Annie's Homegrown, a maker of all natural macaroni and cheese, told its customers about its IPO with a notice in the pasta box -- the bankers who handled the offering say people would generally discover the note as it hit the boiling water.

The traditional theory behind selling stock to your customers has been that customers who already use the product will be "buy and hold" investors -- long-term believers who like the product and expect a lot more people to use it. It doesn't hurt that, say, if you own stock in Annie's you might be a lot less likely to switch to Kraft.

Now the Internet has arrived, and like a lot of other things in the financial markets, this theory has been turned upside down. The point of giving away stock in a technology company is now not, in large part, to gain long-term investors. It's to give free money to loyal friends and users, and to create a lot of buzz in the press and plenty of positive word of mouth.

Next page | We want to reward our customers -- who cares if they hold onto the stock?