Rep. Beto O'Rourke (D-Texas) has received special access to initial public offerings since he hired his Morgan Stanley stockbroker in 2003. But as the freshman Democrat is now learning, elite access to IPOs doesn't fly as a member of Congress.
O'Rourke has bought into seven IPOs since taking office in January, which apparently violates the STOCK Act's prohibition on IPO purchases. IPOs are highly sought-after investments usually reserved for the most influential investors since they often generate windfall profits on their first day of trading. In fact, O'Rourke saw a 39 percent increase on the shares that he sold either the same day or within days of the IPO.
After LegiStorm reached out to his office, O'Rourke immediately reported himself to the House Ethics Committee.
The freshman lawmaker bought seven stocks at the fixed IPO prices, including Twitter, 58 COM Inc., Surgical Care Affiliates, Third Point Reinsurance, Phillips 66 Partners LP, RetailMeNot Inc. and Noodles Inc. He made $4,800 in profit on the shares he sold, according to O'Rourke's letter to the Ethics Committee. Additionally he has kept some other shares which would earn him nearly $2,400 in additional profit - a 36 percent overall return - if sold at today's opening prices.
O'Rourke said in his letter that he did not direct his broker to make any of the purchases and "none of the purchases were made on our behalf because of my position." He said he has "instructed our broker to stop any further transactions."
The House Ethics Committee issued a letter on Nov. 5, 2013, warning members of Congress about participating in IPOs, specifically mentioning the hot Twitter IPO. O'Rourke and his wife have had their El Paso, Texas-based Morgan Stanley broker since 2003, with their first transaction being IPass' IPO.
Prior to his election to Congress, O'Rourke started his own technology consulting business, Stanton Street Technology Group. He currently serves on the House Homeland Security Committee and House Veterans' Affairs Committee.
