NEW YORK — Spring Street Brewing Co., the firm that pioneered initial public offerings over the World Wide Web, is now taking on Wall Street with plans to arrange Internet IPOs for other companies and set up an online stock exchange.
Spring Street founder Andrew Klein, a former securities lawyer, said Tuesday he has created a new firm, Wit Capital Corp., which will compete with underwriters for new-issue business and allow investors to buy shares on the Web and trade them without using a broker.
"The goal is to fantastically reduce the cost of transactions," Klein said in an interview.
"There are plenty of savings here if you eliminate some of the paperwork, the brokers and the inefficient structure. Through the Internet we can get directly to the public."
The Securities and Exchange Commission welcomed the innovative move but Nasdaq, a potential competitor, was more reserved and said there were regulatory issues to be resolved.
Wit Capital, named after Spring Street's Wit beer, intends to offer investment banking services for which it will receive fees and commissions. Client firms will pay fees and transaction charges while their shares trade through the Wit Capital digital stock exchange.
The company will also offer investors the opportunity to buy into a fund that will give them access to future IPOs Wit Capital arranges.
Klein said institutional investors dominate the IPO market, allowing them to buy at the offering price and sell at higher prices. Individual investors can only get in at a high price and once they do get a chance to buy, the stock often begins to fall, he said.
"Our entire ability to be successful will be in bringing to the market quality offerings at fair prices," he said.
Klein also said launching an IPO is costly for small firms and some are frustrated with the lack of attention they get without a full listing on Nasdaq. "We want to offer something more than just the Nasdaq or NYSE," he said.
To help the new venture along, Klein hopes to merge with an investment bank or brokerage or hire experienced professionals. "Within 30 to 60 days we expect to have a whole team in place and begin development," he said.
Wit Capital is also on the verge of a deal with a technology company that would create the stock exchange system, he added.
Spring Street's move to set up the investment bank and brokerage firm follows last week's conditional approval by the Securities and Exchange Commission of the company's Wit-Trade mechanism. The device, located at Spring Street's Web site, allows investors to post bids and offers for the firm's stock.
Spring Street went public over the Internet in 1995 and is not listed on an exchange. Klein plans to continue running the brewery even as he sets up the Internet exchange venture.
"We have just been overwhelmed with companies calling and have tremendous interest in retaining us to go public over the Internet," said Klein.