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If lawsuits are such a huge issue, why don't companies limit their IPO to, say, 1% at very low valuations and then follow with a larger ATM offering when stock
by lazyjones 8y ago
If lawsuits are such a huge issue, why don't companies limit their IPO to, say, 1% at very low valuations and then follow with a larger ATM offering when stock prices reach a better level to get more cash? Because the banks don't let them?
- Someone 8y agoWho would get to buy that 1%? If there’s any chance of that even remotely looking like “friends of the company owners” or “friends of the banks selling the stock”, people will sue. Even if you make it a lottery, you will have to make sure everybody who would want to buy at the low price gets equal opportunity to do so. Finally, I would think the tax department could see selling at a price that you know is significantly below market value as a gift that is taxable.
- aeternus 8y agoI'm not sure why more companies don't choose to go the direct listing route (like Spotify). Set a reference price, but allow the employees and market decide. Tech companies especially have enough employees that own shares and want to sell that liquidity should not be a big issue. This allows the price to be tested while slowly adding volume (as price stabilizes, more employees willing to sell).