3 ms·

looks like they mispriced. Most of those gains are accruing to underwriters and speculators rather than the company. Same thing happened to eToys.

iooi 9y ago
There's going to be a lot of bankers and their clients celebrating tonight. With 36M shares outstanding, dropbox left around 360M on the table for the bankers.
c1utch1 9y ago
No most of those gains are still accruing with the management team, employees and early investors.
ghfbjdhhv 9y ago
It will be interesting to see how Spotify’s direct listing does.
stanfordkid 9y ago
people always say this during IPO... you need to take volume into account. What is the volume trading at 44% above the opening price? When you put $700mm of securities on the market you need to price them low enough so that investors hold.
- totalZero 9y ago
  18 million shares traded on the open at $29, and since then 23 million shares have traded between $28.80 and $31.60. Safe to say there's a healthy bid at $29.
  - stanfordkid 9y ago
    Right. But who were the buyers? Would the same buyers have bought 10 million shares at $29? Or was it thousands of smaller sized investors paying a premium? You need whales to keep the market stable and I don't think the whales would have bought at $29 ... look at the volume over time post IPO, not just day of. The big investors who came in cheap will buy back shares if the price dips... right now they are profiting off the pop.
totalZero 9y ago
There's an optics component to pricing an IPO. If your shares surge and stay higher than the IPO price for several months, people view that as a positive sign. I'm not saying it makes sense, but it's definitely something that you will see research analysts discuss when talking about newly-public companies. Keep in mind that big players in the equity market are sophisticated about financial reasoning, but not necessarily well-educated when it comes to the technology itself. When you aren't sure how to value the assets and business of a company, optics unavoidably make a difference in the way you trade the company's stock. Look at all these software and tech services companies that are priced off of wonky numbers like EV/sales multiples if you don't believe me. If people see a strong bid, they may be more likely to perceive it as bullishness, which influences their own trading decisions. As a result, the company may actually end up with a higher eventual valuation once the IPO dust has settled and the price has found an equilibrium. Not to mention that the offered stake isn't the whole company.
aaavl2821 9y ago
that's actually a pretty well executed IPO, and most banks shoot for a decent double-digit percentage gain on day 1. its in the company's interest to have IPO investors (their first public mkt investors) rewarded, as it keeps them from selling too much, and it attracts other investors to the stock. dropbox is still unprofitable, so it will probably need to raise more equity in the future, and it helps to reward your early investors it also makes the investment banks happy -- their clients made money on the deal. if dropbox's banks are happy, that helps dropbox, bc as mentioned above, it will need their services again the happier public market investors are, the higher the stock price will go. most employees cant sell stock for at least a few months, and if outside public investors are happy, then by the time employees can sell, the stock will be worth much more if you price too high and all the proceeds accrue to the company rather than investors, you get a debacle like facebooks IPO, where the stocked dropped and didnt recover for over a year

iooi 9y ago

There's going to be a lot of bankers and their clients celebrating tonight. With 36M shares outstanding, dropbox left around 360M on the table for the bankers.

c1utch1 9y ago

No most of those gains are still accruing with the management team, employees and early investors.

ghfbjdhhv 9y ago

It will be interesting to see how Spotify’s direct listing does.

stanfordkid 9y ago

people always say this during IPO... you need to take volume into account. What is the volume trading at 44% above the opening price? When you put $700mm of securities on the market you need to price them low enough so that investors hold.

totalZero 9y ago
18 million shares traded on the open at $29, and since then 23 million shares have traded between $28.80 and $31.60. Safe to say there's a healthy bid at $29.
- stanfordkid 9y ago
  Right. But who were the buyers? Would the same buyers have bought 10 million shares at $29? Or was it thousands of smaller sized investors paying a premium? You need whales to keep the market stable and I don't think the whales would have bought at $29 ... look at the volume over time post IPO, not just day of. The big investors who came in cheap will buy back shares if the price dips... right now they are profiting off the pop.

totalZero 9y ago

There's an optics component to pricing an IPO. If your shares surge and stay higher than the IPO price for several months, people view that as a positive sign. I'm not saying it makes sense, but it's definitely something that you will see research analysts discuss when talking about newly-public companies. Keep in mind that big players in the equity market are sophisticated about financial reasoning, but not necessarily well-educated when it comes to the technology itself. When you aren't sure how to value the assets and business of a company, optics unavoidably make a difference in the way you trade the company's stock. Look at all these software and tech services companies that are priced off of wonky numbers like EV/sales multiples if you don't believe me. If people see a strong bid, they may be more likely to perceive it as bullishness, which influences their own trading decisions. As a result, the company may actually end up with a higher eventual valuation once the IPO dust has settled and the price has found an equilibrium. Not to mention that the offered stake isn't the whole company.

aaavl2821 9y ago

that's actually a pretty well executed IPO, and most banks shoot for a decent double-digit percentage gain on day 1. its in the company's interest to have IPO investors (their first public mkt investors) rewarded, as it keeps them from selling too much, and it attracts other investors to the stock. dropbox is still unprofitable, so it will probably need to raise more equity in the future, and it helps to reward your early investors it also makes the investment banks happy -- their clients made money on the deal. if dropbox's banks are happy, that helps dropbox, bc as mentioned above, it will need their services again the happier public market investors are, the higher the stock price will go. most employees cant sell stock for at least a few months, and if outside public investors are happy, then by the time employees can sell, the stock will be worth much more if you price too high and all the proceeds accrue to the company rather than investors, you get a debacle like facebooks IPO, where the stocked dropped and didnt recover for over a year