11 ms·

> So when the market goes even lower, we know that the IPO was done out of desperation How is that the correct conclusion. It sounds like the correct conclusio

> So when the market goes even lower, we know that the IPO was done out of desperation How is that the correct conclusion. It sounds like the correct conclusion is they still over estimated the market price. Nothing about desperation for or against.

resters 7y ago
> It sounds like the correct conclusion is they still over estimated the market price The bank has every incentive not to do that. The bank must juggle the needs of its various constituencies, preferred investors (who provide capital expecting not to have it lose value right away), the firm (which wants to raise capital) and existing investors (who may want to liquidate). If a bank routinely over-prices IPOs, then preferred investors will stop providing capital. If the bank routinely under-prices IPOs, then firms will choose other banks to underwrite their IPOs. In addition to the above, the investment bank owns a lot of inventory and strategically buys and sells in order to help keep the price close to the expected price. When this doesn't happen, it might be because the bank couldn't afford to constrain the price movement and had to settle for the bad optics. This is how the system is supposed to work, but the main reason an IPO would be over-priced (all things considered) is if the existing investors had too much say in the price, since this tarnishes the bank's credibility for future IPOs events.
- tapland 7y ago
  You say this because you want it to seem like desperation. The claim that any stock that is overvalued at IPO shows desperation is just not true, and it's the statement you are making.
  - resters 7y ago
    No, I said it is too soon to tell, and that it has more to do with the balance of power going into the IPO.
    - tapland 7y ago
      > No, I said it is too soon to tell Your comment had no relevance for what I wrote. You said it was too soon because stock can be volatile the first week, but that it ending the week down still proves desperation. This is just not right at all.
      - eganist 7y ago
        They explained it pretty succinctly. Grossly oversimplified: the bank is motivated to accurately price in order to preserve future business from e.g. institutional investors. Overprice and your investors bleed. Substantially underprice and you leave money on the table, less likely to be picked for future offerings. Come close and everyone's generally pretty happy. I'd be keen to hear why you believe it's "just not right at all."
deleted 7y ago
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resters 7y ago

> It sounds like the correct conclusion is they still over estimated the market price The bank has every incentive not to do that. The bank must juggle the needs of its various constituencies, preferred investors (who provide capital expecting not to have it lose value right away), the firm (which wants to raise capital) and existing investors (who may want to liquidate). If a bank routinely over-prices IPOs, then preferred investors will stop providing capital. If the bank routinely under-prices IPOs, then firms will choose other banks to underwrite their IPOs. In addition to the above, the investment bank owns a lot of inventory and strategically buys and sells in order to help keep the price close to the expected price. When this doesn't happen, it might be because the bank couldn't afford to constrain the price movement and had to settle for the bad optics. This is how the system is supposed to work, but the main reason an IPO would be over-priced (all things considered) is if the existing investors had too much say in the price, since this tarnishes the bank's credibility for future IPOs events.

tapland 7y ago
You say this because you want it to seem like desperation. The claim that any stock that is overvalued at IPO shows desperation is just not true, and it's the statement you are making.
- resters 7y ago
  No, I said it is too soon to tell, and that it has more to do with the balance of power going into the IPO.
  - tapland 7y ago
    > No, I said it is too soon to tell Your comment had no relevance for what I wrote. You said it was too soon because stock can be volatile the first week, but that it ending the week down still proves desperation. This is just not right at all.
    - eganist 7y ago
      They explained it pretty succinctly. Grossly oversimplified: the bank is motivated to accurately price in order to preserve future business from e.g. institutional investors. Overprice and your investors bleed. Substantially underprice and you leave money on the table, less likely to be picked for future offerings. Come close and everyone's generally pretty happy. I'd be keen to hear why you believe it's "just not right at all."

deleted 7y ago

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