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A couple of interesting things about the IPO. A Lot more the trades happening are tagged as coming from trade reporting facilities, which means they were cross

A couple of interesting things about the IPO. A Lot more the trades happening are tagged as coming from trade reporting facilities, which means they were crossed/filled by internalizes, than is normal. This usually means retail flow( regular folks) using E-Trade, Ameritrade, Interactive Broker, Scott Trade, etc to buy/sell shares. These firms get paid to send their orders to HFT firms who fill the orders internally(ie not on an exchange) and then use trade reporting facilities to notify the markets of these orders. Also supporting this thesis is the number of small and odd lot trades. So you could argue that main street likes Square more than Wall street. With the market down and Match.com's IPO popping less, this is a very good opening for them. Having said that, the real test for most new stocks is 6 months out when they've had 2 reporting quarters, options start to trade and short interest numbers( a measure of how many people want to short the company) start to have some validity. Question to anyone more informed than me...... Do squares late series investor's liquidation preference kick in at the IPO opening price or the vwap price through the day? If it's the former, then the late stage investors are going to get a great double dip of getting a huge increase in shares due to the ipo price being below their strike and get the benefit of this pop. Maybe late stage investors aren't as dumb as people around here have been claiming lately?

roymurdock 11y ago
> A Lot more the trades happening are tagged as coming from trade reporting facilities Where are you getting your data - a Bloomberg terminal?
- chollida1 11y ago
  Yes Bloomberg terminal, along with multiple data feeds and my own analysis tools.
  - ChuckMcM 11y ago
    How much overhang? (wondering if this a Groupon like thing where the number of shares floated was so small that any demand would have a big upswing, or if the upswing was based on a reasonable fraction of the shares outstanding.)
    - roymurdock 11y ago
      None of Square’s existing investors sold stock in the IPO, with the float representing just 8% of the company’s outstanding shares. [1] Very small float. Seems like they structured the IPO to have minimal exit risk and to be a PR success rather than going for a higher starting price and capitalization. The "Don't worry we know there's a bubble but we're being realistic and the stock is a good buy" strategy. [1] http://fortune.com/2015/11/18/square-prices-ipo/ http://fortune.com/2015/11/18/square-prices-ipo/
jonknee 11y ago
> Also supporting this thesis is the number of small and odd lot trades. That's the norm in all stocks these days because of HFT. Even in highly liquid names.
elbigbad 11y ago
Square was doing the thing where they opened up their IPO to select "loyal customers," which are just normal people. Could this be part of it?
evanpw 11y ago
This is a totally plausible theory, but I'd also point out that all dark pool trades get reported through the TRF; it's not just retail internalizers. The spread on SQ is also 1 cent, which tends to lead to more dark trading.
exelius 11y ago
Yeah; this happens a lot with big tech IPOs. Typically they will spike on day 1 with lots of individual investors buying in to the hype train. I would expect to see Square drop precipitously over the next week/month as the professional investors can make money by pushing the valuation down, then it'll stabilize somewhere near the IPO price in 6-12 months. Company fundamentals have very little to do with share price in the first year or two of an IPO; it's almost entirely psychological. And nobody's been claiming that late-stage investors are dumb; in fact quite the opposite. Late stage investors tend to be very large, professionally managed equity funds - they are as savvy as investors get, and they're strong-arming early stage investors into unfavorable liquidation preferences. They're also the type of investor to have media / analyst contacts they can use to push down the IPO price knowing that it's going to pop. The discussion with late stage investors is really "the fact that late-stage investors are sucking up a disproportionate share of the profits from unicorn exits is endangering the VC investment model".
- chillydawg 11y ago
  None of what you just said has any basis in reality. If you really did know all of that, you would have spent every penny you have a) buying the stock at IPO and b) selling it tomorrow and then immediately shorting it and waiting.
  - bwilliams18 11y ago
    This isn't a binary, just because those things are true, and because they tend to happen doesn't mean they are certainties or worth betting your whole net worth on. Anything could happen. There are outside market events to consider.
    - chillydawg 11y ago
      Right, fine. So perhaps I should re-state my criticism as: If you know this is the case, then why not bet 2% of your net worth on every tech IPO that you magically know will pop and make huge gains vs the wider market. The answer is that you cannot do this because it is NOT TYPICAL. Plenty of tech IPOs flop but cognitive bias means you only remember the googles and apples and squares and not the 50% that go south of ipo price straight after launch.

roymurdock 11y ago

> A Lot more the trades happening are tagged as coming from trade reporting facilities Where are you getting your data - a Bloomberg terminal?

chollida1 11y ago
Yes Bloomberg terminal, along with multiple data feeds and my own analysis tools.
- ChuckMcM 11y ago
  How much overhang? (wondering if this a Groupon like thing where the number of shares floated was so small that any demand would have a big upswing, or if the upswing was based on a reasonable fraction of the shares outstanding.)
  - roymurdock 11y ago
    None of Square’s existing investors sold stock in the IPO, with the float representing just 8% of the company’s outstanding shares. [1] Very small float. Seems like they structured the IPO to have minimal exit risk and to be a PR success rather than going for a higher starting price and capitalization. The "Don't worry we know there's a bubble but we're being realistic and the stock is a good buy" strategy. [1] http://fortune.com/2015/11/18/square-prices-ipo/ http://fortune.com/2015/11/18/square-prices-ipo/

jonknee 11y ago

> Also supporting this thesis is the number of small and odd lot trades. That's the norm in all stocks these days because of HFT. Even in highly liquid names.

elbigbad 11y ago

Square was doing the thing where they opened up their IPO to select "loyal customers," which are just normal people. Could this be part of it?

evanpw 11y ago

This is a totally plausible theory, but I'd also point out that all dark pool trades get reported through the TRF; it's not just retail internalizers. The spread on SQ is also 1 cent, which tends to lead to more dark trading.

exelius 11y ago

Yeah; this happens a lot with big tech IPOs. Typically they will spike on day 1 with lots of individual investors buying in to the hype train. I would expect to see Square drop precipitously over the next week/month as the professional investors can make money by pushing the valuation down, then it'll stabilize somewhere near the IPO price in 6-12 months. Company fundamentals have very little to do with share price in the first year or two of an IPO; it's almost entirely psychological. And nobody's been claiming that late-stage investors are dumb; in fact quite the opposite. Late stage investors tend to be very large, professionally managed equity funds - they are as savvy as investors get, and they're strong-arming early stage investors into unfavorable liquidation preferences. They're also the type of investor to have media / analyst contacts they can use to push down the IPO price knowing that it's going to pop. The discussion with late stage investors is really "the fact that late-stage investors are sucking up a disproportionate share of the profits from unicorn exits is endangering the VC investment model".

chillydawg 11y ago
None of what you just said has any basis in reality. If you really did know all of that, you would have spent every penny you have a) buying the stock at IPO and b) selling it tomorrow and then immediately shorting it and waiting.
- bwilliams18 11y ago
  This isn't a binary, just because those things are true, and because they tend to happen doesn't mean they are certainties or worth betting your whole net worth on. Anything could happen. There are outside market events to consider.
  - chillydawg 11y ago
    Right, fine. So perhaps I should re-state my criticism as: If you know this is the case, then why not bet 2% of your net worth on every tech IPO that you magically know will pop and make huge gains vs the wider market. The answer is that you cannot do this because it is NOT TYPICAL. Plenty of tech IPOs flop but cognitive bias means you only remember the googles and apples and squares and not the 50% that go south of ipo price straight after launch.