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Well, it's called an exit for a reason. Essentially, a team of professional financial analysis that have models and experience pricing the stocks, and a knowled

Well, it's called an exit for a reason. Essentially, a team of professional financial analysis that have models and experience pricing the stocks, and a knowledgeable PR team, decide the best time and the price to dump the stock onto the market in order to maximize the returns the existing equity holders will get. As a retail investor, you're practically betting against the house here.

harryh 8y ago
The vast majority of the shares owned by the major investors aren't sold on the day of the IPO.
askafriend 8y ago
Early Lyft investors have a 180 day lockup period - same as employees.
- nissimk 8y ago
  Is there any rule or provision preventing them from short selling the stock in another account?
  - nemo44x 8y ago
    Yes that would be a violation of their lockup agreement. They can’t buy/sell puts/calls either.
    - docker_up 8y ago
      How would they be found out though?
      - mandeepj 8y ago
        It's all linked via your SSA
      - dboreham 8y ago
        Through KYC processes? They could theoretically conspire with another person who runs the trade but eventually compensates the principal. They'd only be found out through regular white collar crime fighting measures: parallel construction from NSA sigint for example.
        docker_up 8y ago
        But how would Lyft know that an employee bought puts from E-trade? How is that information shared? I don't think there's any information being exchanged by every single brokerage to Lyft, is there? The lockup agreement is a contractual thing, it's not a legal document. I don't see how Lyft would have the legal rights to search.
        jedberg 8y ago
        How do the police know that you're cooking meth in your basement? They don't, but if you do something dumb or make a lot of money, they tend to find out. It's the same here. Buying/selling options on Lyft as an employee is against their employment contract, and probably SEC rules. If they make a few thousand dollars doing it, chances are no one will find out. If they make a few million, the SEC will probably look into that.
        docker_up 8y ago
        Why is the SEC involved, especially if there's no insider trading involved? What if a Lyft employee quit a few months ago, and then hedges her RSUs with puts? There's no insider trading involved, why would the SEC care?
        asynchrony 8y ago
        Employees are normally forbidden from trading any derivatives, short selling, or even buying shares in a margin account. I’m not sure about the case of an employee that has left the company, but I expect that it would still qualify as insider trading through some window.
  - rongenre 8y ago
    Underwriters insist on a lockup period for a reason. Everyone asks about short selling and options, and the answer is always no.
warp_factor 8y ago
you are right and I'm not sure why you are being downvoted. Most of the 72$ shares sold pre-IPO to retail investors were dumped on IPO day to make a quick profit. The individual investors and employees that are still in LockOut are now holding the falling knife
- vonmoltke 8y ago
  > Most of the 72$ shares sold pre-IPO to retail investors were dumped on IPO day Why do you think any retail investors got shares at $72?
- deleted 8y ago
  [deleted]
- sk5t 8y ago
  > holding the falling knife That is... not how that metaphor works. You want to avoid trying to catch the falling knife by placing a trade that attempts to time the market on a plummeting asset. But if you already hold it, and can't make any trades, well...
monitorman 8y ago
If things were as simple as this, you could then always short IPOs for a while, and the expected value would be positive.
- xiphias2 8y ago
  Actually so far for the last few years at least this strategy was quite profitable. New IPOs significantly underperformed S&P500
- opportune 8y ago
  You can short sell but unfortunately (at least for retail, and to the extent of my knowledge) not trade options in the first week of trading for a newly listed stock. Which is a shame because I 100% would have bought puts in the first hours of trading when I saw the market price surge into the 80s. Lyft's float is pretty low volume so the surge of retail investors trying to add Lyft to their portfolios caused a mini bubble.
- mikestew 8y ago
  I'm sure you haven't looked over historical data, but if you did you'd find this to be a profitable strategy were it not for two problems: finding shares to borrow (a requirement to "short" a stock, because you borrow them and immediately sell), and if you try and fix that problem with buying put options, those won't be available for a week.
- stevedewald 8y ago
  Yes, and the expected value is positive. Unfortunately for us, the banks that underwrite the IPO choose who to allocate the shares to, and they would prefer to allocate them to clients that have a history of not dumping the stock and/or lending shares out for shorts.
  - gruez 8y ago
    You'd think that if the EV was positive, that no one would buy the IPO, and would instead but a few days/weeks later. Why buy before the dip?
  - 8y ago

harryh 8y ago

The vast majority of the shares owned by the major investors aren't sold on the day of the IPO.

askafriend 8y ago

Early Lyft investors have a 180 day lockup period - same as employees.

nissimk 8y ago
Is there any rule or provision preventing them from short selling the stock in another account?
- nemo44x 8y ago
  Yes that would be a violation of their lockup agreement. They can’t buy/sell puts/calls either.
  - docker_up 8y ago
    How would they be found out though?
    - mandeepj 8y ago
      It's all linked via your SSA
    - dboreham 8y ago
      Through KYC processes? They could theoretically conspire with another person who runs the trade but eventually compensates the principal. They'd only be found out through regular white collar crime fighting measures: parallel construction from NSA sigint for example.
      - docker_up 8y ago
        But how would Lyft know that an employee bought puts from E-trade? How is that information shared? I don't think there's any information being exchanged by every single brokerage to Lyft, is there? The lockup agreement is a contractual thing, it's not a legal document. I don't see how Lyft would have the legal rights to search.
        jedberg 8y ago
        How do the police know that you're cooking meth in your basement? They don't, but if you do something dumb or make a lot of money, they tend to find out. It's the same here. Buying/selling options on Lyft as an employee is against their employment contract, and probably SEC rules. If they make a few thousand dollars doing it, chances are no one will find out. If they make a few million, the SEC will probably look into that.
        docker_up 8y ago
        Why is the SEC involved, especially if there's no insider trading involved? What if a Lyft employee quit a few months ago, and then hedges her RSUs with puts? There's no insider trading involved, why would the SEC care?
        asynchrony 8y ago
        Employees are normally forbidden from trading any derivatives, short selling, or even buying shares in a margin account. I’m not sure about the case of an employee that has left the company, but I expect that it would still qualify as insider trading through some window.
- rongenre 8y ago
  Underwriters insist on a lockup period for a reason. Everyone asks about short selling and options, and the answer is always no.

warp_factor 8y ago

you are right and I'm not sure why you are being downvoted. Most of the 72$ shares sold pre-IPO to retail investors were dumped on IPO day to make a quick profit. The individual investors and employees that are still in LockOut are now holding the falling knife

vonmoltke 8y ago
> Most of the 72$ shares sold pre-IPO to retail investors were dumped on IPO day Why do you think any retail investors got shares at $72?
deleted 8y ago
[deleted]
sk5t 8y ago
> holding the falling knife That is... not how that metaphor works. You want to avoid trying to catch the falling knife by placing a trade that attempts to time the market on a plummeting asset. But if you already hold it, and can't make any trades, well...

monitorman 8y ago

If things were as simple as this, you could then always short IPOs for a while, and the expected value would be positive.

xiphias2 8y ago
Actually so far for the last few years at least this strategy was quite profitable. New IPOs significantly underperformed S&P500
opportune 8y ago
You can short sell but unfortunately (at least for retail, and to the extent of my knowledge) not trade options in the first week of trading for a newly listed stock. Which is a shame because I 100% would have bought puts in the first hours of trading when I saw the market price surge into the 80s. Lyft's float is pretty low volume so the surge of retail investors trying to add Lyft to their portfolios caused a mini bubble.
mikestew 8y ago
I'm sure you haven't looked over historical data, but if you did you'd find this to be a profitable strategy were it not for two problems: finding shares to borrow (a requirement to "short" a stock, because you borrow them and immediately sell), and if you try and fix that problem with buying put options, those won't be available for a week.
stevedewald 8y ago
Yes, and the expected value is positive. Unfortunately for us, the banks that underwrite the IPO choose who to allocate the shares to, and they would prefer to allocate them to clients that have a history of not dumping the stock and/or lending shares out for shorts.
- gruez 8y ago
  You'd think that if the EV was positive, that no one would buy the IPO, and would instead but a few days/weeks later. Why buy before the dip?
- 8y ago