Red Hat IPO Fiasco Worries E*Trade Stock Holders
Red Hat should have given the whole offer a little bit more thought before sending out the emails.
Giving away stock options rather than IPO shares would have solved the whole problem.
I imagine that they may have thought giving the opportunity to buy shares is best because at least they do make some cash from the sale, regardless.
If the distribution was in the form of an options package, there is no problem if the company goes bankrupt. It also prevents the un-evening of the playing field on the basis of financial discrimination, since everyone gets an equal portion.
As a side benifit, the added value of the options since they are puchased at a negligible price, would mean that fewer total shares need be given away... leaving more shares for the open market IPO - thereby more money for Red Hat.
A potential negative of giving out options packages is that there is a fairly large paperwork obligation - perhaps this is why Red Hat did not do it.