John,

I spoke with WitCapital's investment banking and equity syndication groups today regarding internet distributed IPOs.  Confirming some of our earlier research, the internet is used as one of several distribution channels for an IPO, not the sole distribution channel.  This is not to say that a 100% internet distributed IPO can not be done, however.  Although, WitCapital said they would not do one.  

WitCapital emphasized the need for a large (>50%) stock distribution to instutional investors in an IPO.  70% to 80% allocation is typical.  To this end, the bank has hired an institutional sales force, which uses the telephone rather than the internet to sell.  

In WitCapital's opinion, an IPO with 70% to 80% institutional allocation and 20% to 30% retail allocation is an optimal structure which maximizes the price obtained by the issuer.  Such higher price would presumably more than offset the higher cost of a typical IPO versus an internet distributed IPO.

In addition, WiCapital's opinion is that the liquidity and trading evironment would be healthier for a typical IPO versus an internet distributed IPO, which would give the stock support in a secondary offering whereby the issuer is unloading its holdings.

Please let me know if you would like for us to do additional research on this topic.

Regards,

Kyle Kettler
x30423