5 ms·

The speculators done gone made a lot of money off the geeks. Tesla was a typical speculator IPO, now the reality of the risk facing the company will set in and

by jeb 16y ago

The speculators done gone made a lot of money off the geeks. Tesla was a typical speculator IPO, now the reality of the risk facing the company will set in and the price will go to its standard level till they start to show real potential.

padmanabhan01 16y ago
If the speculators are able to make money off the geeks, who are the real geeks then?
- phreeza 16y ago
  The finance geeks made money off the technology geeks?
  - deleted 16y ago
    [deleted]
  - illumin8 16y ago
    Alpha males win again. Keep trying, beta males.
    - kirubakaran 16y ago
      http://www.google.com/finance?q=goog http://www.google.com/finance?q=goog
      - knieveltech 16y ago
        Flawless victory.
    - mahmud 16y ago
      That's a very literal alpha: http://en.wikipedia.org/wiki/Alpha_%28investment%29 http://en.wikipedia.org/wiki/Alpha_%28investment%29
cynicalkane 16y ago
Are you talking about the geeks at Tesla or the geeks who bought stock after the price jumped? If the former, companies often IPO at prices below what they're worth--if the IPO is issued at a fair price, then it's Tesla that benefits, not the speculators. If the latter, buying stock because it's going up is an act of speculation, not necessarily geekishness.
- eru 16y ago
  Yes, I don't really get why any company would IPO below their fair price. Every time I see a company's stock go up massively on the first day, I ask me "Why did they not charge a higher price for their stock in the first place?".
  - dantheman 16y ago
    They don't sell all of their stock at the initial price, but sell it later at the higher prices.
    - eru 16y ago
      OK. But still, why sell even some of the stock lower than necessary? Or does the excitement created pay off in the longer term?
  - lkrubner 16y ago
    Leaving money on the table during an IPO is often attacked as a form of fraud. I recall it was a big issue during the peak of the Internet boom, 1997-2000. There you had a lot of startups desperate for money to fund their growth, and yet they gave away substantial amounts of money to speculators. There were clear abuses of "Friends and Family" blocks of stock -- these started getting handed out to anyone who could move the deal forward, with the understanding that the stock could be dumped on the opening day of trading. This amounted to a kind of bribe, an additional payment made in excess of all the normal IPO fees. Wikipedia offers this: http://en.wikipedia.org/wiki/Initial_public_offering http://en.wikipedia.org/wiki/Initial_public_offering "The underpricing of initial public offerings (IPO) has been well documented in different markets (Ibbotson, 1975; Ritter 1984; Levis, 1990; McGuinness, 1992). While Issuers always try to maximize their issue proceeds, the underpricing of IPOs has constituted a serious anomaly in the literature of financial economics. Many financial economists have developed different models to explain the underpricing of IPOs. Some of the models explained it as a consequences of deliberate underpricing by issuers or their agents. In general, smaller issues are observed to be underpriced more than large issues (Ritter, 1984, Ritter, 1991, Levis, 1990) Historically, IPOs both globally and in the United States have been underpriced. The effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first becomes publicly traded. Through flipping, this can lead to significant gains for investors who have been allocated shares of the IPO at the offering price. However, underpricing an IPO results in "money left on the table"—lost capital that could have been raised for the company had the stock been offered at a higher price. One great example of all these factors at play was seen with theglobe.com IPO which helped fuel the IPO mania of the late 90's internet era. Underwritten by Bear Stearns on November 13, 1998 the stock had been priced at $9 per share, and famously jumped 1000% at the opening of trading all the way up to $97, before deflating and closing at $63 after large sell offs from institutions flipping the stock . Although the company did raise about $30 million from the offering it is estimated that with the level of demand for the offering and the volume of trading that took place the company might have left upwards of $200 million on the table." All the same, Wikipedia also offers a charitable explanation for the phenomena: "The danger of overpricing is also an important consideration. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting their commitments to sell shares. Even if they sell all of the issued shares, if the stock falls in value on the first day of trading, it may lose its marketability and hence even more of its value."

by jeb 16y ago

padmanabhan01 16y ago

If the speculators are able to make money off the geeks, who are the real geeks then?

phreeza 16y ago
The finance geeks made money off the technology geeks?
- deleted 16y ago
  [deleted]
- illumin8 16y ago
  Alpha males win again. Keep trying, beta males.
  - kirubakaran 16y ago
    http://www.google.com/finance?q=goog http://www.google.com/finance?q=goog
    - knieveltech 16y ago
      Flawless victory.
  - mahmud 16y ago
    That's a very literal alpha: http://en.wikipedia.org/wiki/Alpha_%28investment%29 http://en.wikipedia.org/wiki/Alpha_%28investment%29

cynicalkane 16y ago

Are you talking about the geeks at Tesla or the geeks who bought stock after the price jumped? If the former, companies often IPO at prices below what they're worth--if the IPO is issued at a fair price, then it's Tesla that benefits, not the speculators. If the latter, buying stock because it's going up is an act of speculation, not necessarily geekishness.

eru 16y ago
Yes, I don't really get why any company would IPO below their fair price. Every time I see a company's stock go up massively on the first day, I ask me "Why did they not charge a higher price for their stock in the first place?".
- dantheman 16y ago
  They don't sell all of their stock at the initial price, but sell it later at the higher prices.
  - eru 16y ago
    OK. But still, why sell even some of the stock lower than necessary? Or does the excitement created pay off in the longer term?
- lkrubner 16y ago
  Leaving money on the table during an IPO is often attacked as a form of fraud. I recall it was a big issue during the peak of the Internet boom, 1997-2000. There you had a lot of startups desperate for money to fund their growth, and yet they gave away substantial amounts of money to speculators. There were clear abuses of "Friends and Family" blocks of stock -- these started getting handed out to anyone who could move the deal forward, with the understanding that the stock could be dumped on the opening day of trading. This amounted to a kind of bribe, an additional payment made in excess of all the normal IPO fees. Wikipedia offers this: http://en.wikipedia.org/wiki/Initial_public_offering http://en.wikipedia.org/wiki/Initial_public_offering "The underpricing of initial public offerings (IPO) has been well documented in different markets (Ibbotson, 1975; Ritter 1984; Levis, 1990; McGuinness, 1992). While Issuers always try to maximize their issue proceeds, the underpricing of IPOs has constituted a serious anomaly in the literature of financial economics. Many financial economists have developed different models to explain the underpricing of IPOs. Some of the models explained it as a consequences of deliberate underpricing by issuers or their agents. In general, smaller issues are observed to be underpriced more than large issues (Ritter, 1984, Ritter, 1991, Levis, 1990) Historically, IPOs both globally and in the United States have been underpriced. The effect of "initial underpricing" an IPO is to generate additional interest in the stock when it first becomes publicly traded. Through flipping, this can lead to significant gains for investors who have been allocated shares of the IPO at the offering price. However, underpricing an IPO results in "money left on the table"—lost capital that could have been raised for the company had the stock been offered at a higher price. One great example of all these factors at play was seen with theglobe.com IPO which helped fuel the IPO mania of the late 90's internet era. Underwritten by Bear Stearns on November 13, 1998 the stock had been priced at $9 per share, and famously jumped 1000% at the opening of trading all the way up to $97, before deflating and closing at $63 after large sell offs from institutions flipping the stock . Although the company did raise about $30 million from the offering it is estimated that with the level of demand for the offering and the volume of trading that took place the company might have left upwards of $200 million on the table." All the same, Wikipedia also offers a charitable explanation for the phenomena: "The danger of overpricing is also an important consideration. If a stock is offered to the public at a higher price than the market will pay, the underwriters may have trouble meeting their commitments to sell shares. Even if they sell all of the issued shares, if the stock falls in value on the first day of trading, it may lose its marketability and hence even more of its value."