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December 1, 1999

SoundView Purchase Gives Wit a Market Making Team

By Peter Chapman

Wit Capital is purchasing SoundView Technology Group, a Stamford, Conn. research boutique, for $320 million in stock and options.

The pioneer Internet investment bank is hoping to jump start its grand plan to allow individual investors to participate in online IPOs.

SoundView will give Wit two things it lacks: institutional clients and a market making team. Without them it is difficult for Wit to garner sizable share allotments in initial public stock offerings. Small allotments have meant small fees and not enough stock for its investors.

Product Offerings

"To fulfill our mission to individuals and issuers, we have to dramatically grow our content and product offerings," said Ron Readmond, Wit Capital's co-chief executive.

Readmond expects an institutional investor base to lead to allotments of one million shares or more per IPO, up from 200,000 presently. He expects management fees to increase to between 25 percent and 30 percent. They now range from 10 percent to 15 percent.

A trading team will provide the after-market support that most issuers demand from an underwriter.

SoundView's trading team currently comprises nine Nasdaq position traders, three listed traders and 15 sales traders. It trades 170 Nasdaq and OTC names and was ranked 35th in share volume, according to AutEx BlockDATA, for the first 10 months of the year. The Wit deal will add an additional 45 stocks to the roster.

SoundView President and Chief Executive Russ Crabs said headcount on the desk would likely rise. The deal closes in early 2000.

SoundView head trader, Ed Bugniazet, is upbeat. "We have a stable and growing institutional business and [Wit] is strong in retail," he said. "There's very little overlap. We should work in concert."

Combine Strengths

The new organization will also combine Wit's strengths in Internet stocks with SoundView's information technology expertise.

Bugniazet added that meshing retail order flow into a mostly institutional operation would mean some tweaking of the trading technology.

SoundView's trading desk contributed about 80 percent of the firm's $100 million in revenues for the first nine months of the year, according to Bugniazet. Wit grossed $27 million in the same period.