4 ms·
The underpricing pop disappears faster than a fart in the wind. Underpricing in IPOs is direct theft of value from shareholders and employees to investment bank
by valuearb 6y ago
The underpricing pop disappears faster than a fart in the wind. Underpricing in IPOs is direct theft of value from shareholders and employees to investment banks and their clients, and provides zero value for the company.
- nuclearnice1 6y agoWhy does it persist? I can think of three non-exclusive possibilities: * Market power of banks * Corruption of the stock-compensated managers who benefit from the pop * Genuine or perceived benefit to the company in further price raising. (Mentioned above)
- lmm 6y agoThere's an (also non-exclusive) argument that it's a fair price for the risk that IPO buyers are taking. IPOs do "fail" sometimes, so the pop isn't as great a risk-adjusted return as it looks.