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> Instead of haggling with 1000 individual investors on "price", I haggle with just the bankers at Goldman Sachs or Merril Lynch. Well in an ideal world, compa
by dlubarov 9y ago
> Instead of haggling with 1000 individual investors on "price", I haggle with just the bankers at Goldman Sachs or Merril Lynch.
Well in an ideal world, companies shouldn't have to haggle at all -- a public auction should determine the IPO price. Or better yet, companies should be able to just submit sell orders as they see fit, without being required to make any volume or price commitments beforehand.
- beejiu 9y ago> a public auction should determine the IPO price An IPO is (usually) for a small amount of a company (5-10%) - hence the term "initial". Once the stock is traded, the market is continuously setting prices (essentially a continuous auction) and companies are able to sell more stock if they so wish. The reason IPOs are not also auctions (or market priced) is because that model has been tried and it doesn't work.
- nordsieck 9y agoIt seemed to work just fine for Google. What evidence do you have that it doesn't work well?
- beejiu 9y agoGoogle's IPO auction famously just scraped the low-end of its estimate (after the range was revised down). It "popped" 18% on its first day of trading which - at very best - shows that dutch auction is no better than underwriting. " The offer price of $85 was well below initial expectations" (https://www.vcexperts.com/buzz_articles/252 https://www.vcexperts.com/buzz_articles/252)
- dlubarov 9y agoAccording to https://www.iposcoop.com/the-ipo-buzz-a-dirty-dutch-auction/ https://www.iposcoop.com/the-ipo-buzz-a-dirty-dutch-auction/ "the mean average of all 21 [auction IPO] opening-day gain[s] was 1.25 percent". So it seems like Google was an anomaly, but Dutch IPOs in general are not leaving much money on the table compared to traditional IPOs.