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An IPO is an initial public offering. Do you know what that means? Wall street doesn't create anything, it just sells stock to its clients and others. Often it
by megablast 17y ago
An IPO is an initial public offering. Do you know what that means? Wall street doesn't create anything, it just sells stock to its clients and others. Often it sells stock to clients before the IPO, which it then sells for the clients again when the stock price reaches a certain number.
This is one of the reasons Google went for a dutch-style auction process for its IPO, and wall street was pissed, since they couldn't use their usual methods to make money from that.
The other things Wall St does is mergers and acquisitions, where they make huge amounts of money on consulting fees.
I mean, sure they do a lot more. They increase liquidity in the market, they help companies get loans, but most of it is moving money around, and getting a fee for it.
- tome 17y agoIf it wasn't useful no-one would pay them for it.
- cakesy 17y agoIt is very useful to the people involved, in that they make a lot of money. It may not be useful to the economy, or society.
- isleyaardvark 17y agoJust because someone thinks they're paying for something useful doesn't mean they are paying for something useful.
- aliston 17y agoAt least 20+ years ago Wall Street mostly made money by making available tangible assets to the common investor -- facilitating IPOs and mergers aka "moving money around" does provide for efficient allocation of capital which in turn creates wealth over the long-term. I can understand the argument, then, that bankers are/were providing a service that is beneficial for society. In the last 10 years, though, IPOs have more or less dried up due to Sarbanes-Oxley and M&A activity is only slowly re-emerging. As a result, big banks make most of their profits from larger and riskier trading operations and pumping out intellectual gobledeegook like the CDOs that caused this whole mess. It's this "modern" intellectualized finance stuff that REALLY is just moving around paper junk for profit.