This doesn’t make any sense at all. Picture there being 3 groups of individuals:
Insiders (those who own shares before the IPO)
Favored VIPs (those people who will participate in the IPO at the IPO price)
General public
Selling at a “fair” price just means that the favored VIPs will pay more to acquire the shares. Assuming the insiders have a lockup provision, they only benefit from the higher price to the extent that their shares become more valuable by virtue of the firm raising more cash.
Insiders aren’t printing money for themselves via IPO pricing under any scenario.
That’s a little different, I don’t have a problem with that and my first instinct is that it’s good. The workers get a freeroll into partial ownership.
Right what I’m saying is that there should not be a class of people who are “favored VIPs.” Also it seems pretty likely that one way to become a favored VIP in future IPOs is to be the CEO of a company that goes public at a lower price and cuts all these current favored VIPs in.
This stuff should be done through some sort of a public auction with a reasonably low barrier to entry.
Your desired goal is that the company (and any insiders selling stock as part of the offering) receive more money. There is literally nothing to be gained by the public.
I remember about a year ago that tooth saver guy was like, Tesla’s going to have to raise a billion dollars at some point! They won’t be able to! Will be game over then imo.
Tesla raises 5 billion casually, twice in three months, ndb. lol.
DASH indicated to be in the $145-150 range for the first trade. Like the good ol’ boys who got to buy Door Dash at $102 just get a free ~45% in a day by virtue of being good ol’ boys, and people here are like, “Yep, nothing we can do, nothing wrong is happening here.”
C’mon guys, that’s not right. It might be tough to fix, but what’s happening is clearly not a functioning free market, fair, right, etc.
Edit: 6 minutes later, now $150-155 indicated, so make that a free ~49.5%.
Edit: 14 mins later, now $155-160 indicated, so make that a free ~54.4%.
This isn’t free money! IPOs are risky. You can cherry pick individual IPOs to make a point, but here is some aggregate data:
It’s an aggregate first-day return (closing market price minus offer price) of 12.6%. But the average 3-year market-adjusted return (including that first-day bump) is only +1.4%; that first-day free money basically reverses post-IPO. So you’re basically counting on individual investors acting like complete morons on IPO day and selling before the price corrects. If I had the opportunity to buy DASH right now at $102 and was told I had to hold it for just a full week, I wouldn’t do it.
The IPO dynamic is a little like insider trading, upon examination it sure looks like nobody is actually injured (and there is arguably some price discovery / efficiency benefit), but boy does it feel wrong at a gut level.
I mean if they sold shares at $102 via lottery with a low enough minimum purchase amount, I would have entered and had a shot at getting what’s now indicated to be 76% gain in a day.
Instead, they pick VIPs to bestow this opportunity on. So people like Nancy Pelosi, billionaires, CEOs, hedge fund operators, etc get to take part in IPOs. The rest of us do not.
However, you not getting to buy at $100, even assuming the investment bank and company intentionally under-priced the offering, is not an injury to you. The day before the IPO the company could sell stock on the private market at whatever price it wanted and you wouldn’t care, nor would you think you had any right to buy at that (or any other) price.
When the under-priced transaction happens, the loser is the company’s shareholders and the winner is the person who got to buy at the low price. So in practice the founders/remaining owners are injuring themselves, which like, fine!
What irritates you is already rich people getting the benefit, but thats not that same as anyone else getting injured. And, as noted, these are very risky transactions! Nobody seemed too mad about whoever bought Blue Apron at the IPO price.
If they had sold via a lottery and the true demand is in the $170 range, the shares would have been priced close to $170.
Those VIPs pay for the privilege in the fees they pay to the underwriting banks. This is like complaining that American Express Centurion cardholders get amazing deals like front-row seats to Celine Dion concerts, while my Amex Blue Cash gets me a 5% discount on Greg Kihn Band tickets.
And just to be clear, if I had been invited to buy Doordash at $102 and had to commit to that price like 48 hours ago, I never would have purchased a single share.
That’s the American economy in a nutshell though isn’t it? Lots of free money and unlimited chances to fuck up for the top 1%, bootstraps for the rest of us.
