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A couple of comments. The share price is _not_ supposed to drop after an IPO. The insiders still have a lock-up of 6 months, so a lower price would be bad for
by snksnk 10y ago
A couple of comments.
The share price is _not_ supposed to drop after an IPO. The insiders still have a lock-up of 6 months, so a lower price would be bad for them. Moreover, the investors in the IPO also want some upside. In the end, the IPO price is a negotiated price that takes into account a lot of considerations. Once public, the price is dictated by the last trade.
And "smalltime" investors shouldn't invest in IPOs because of the so-called winner's curse.
- mvindahl 10y agoI suppose that if markets were working in a very ideal way, the IPO stock price wouldn't matter much to the stock price half a year from now. Instead, the share price would be a pure function of the internal value and prospects of the company. In the real world, market psychology and all, I think it's better for the medium term stock price to start off as something which the media will frame as a success story. I.e. better start at $80 and quickly rise to $100 than to start at $120 and quickly fall to $100. Disclaimer: opinions based upon voices in head, not upon any kind of research.