4 ms·

If Airbnb doubled on opening, should all the VCs + founders involve be pissed it was so badly mis-priced?

by misiti3780 6y ago

dlp211 6y ago
The VCs and founders still have plenty of their shares to cash in.
- misiti3780 6y ago
  sure - but someone fucked up right? the bankers ?
  - dlp211 6y ago
    Not in anyway an authority on this, but I don't think so. They have to price the stock based on fundamentals and make a best guess. Would a different bank have priced it higher? Maybe marginally, but probably not double or more. Maybe someone with a better understanding can say something here but it seems like the way we do IPOs is not great. I'm not sure how to do it better, but I'm sure that there is a better way to do it. I guess this should be the next yCombinator startup. Disrupting the IPO landscape :P.
    - hyperation 6y ago
      SPAC could be the "better" way perhaps.
  - gamblor956 6y ago
    Yes, if a company gains significantly (or drops significantly) in an IPO, the underwriter royally fucked up. In the old days, there would have been recriminations. These days, people just shrug and think it's acceptable that the financiers lock up most of the gains for economic value created (or, depending on your thoughts of Airbnb's business model, acquired) by others. It's one of the reasons Wall Street has fought so hard to prevent become fiduciaries again. If they were fiduciaries they couldn't get away with crap like this.
  - rebelos 6y ago
    I think we can safely not blame the bankers for failing to assign a $100B valuation to a travel sector company that was valued at $31B before the pandemic.
nrmitchi 6y ago
The IPO price is for new shares which are created, and sold by the company. VCs + founders would have been diluted a bit by that (~8% I think?) but they typically[0] still own all of the shares that they did previously. [0] In some situations founders + VCs + early-employees can sell as part of the IPO itself. I do not know if that applied here.
gamblor956 6y ago
Yes. In the past, mispricing this badly would lead to recriminations for the underwriters, including lawsuits and lost business. For some reason, the financiers were able to convince the gullible tech founders that giving up 50% or more of the IPO to the financier's best buddies was a good thing. And in their greed, the founders gladly went along, screwing themselves and their employees in the process. (Theoretically, the underwriters are granted a pop because of the risk they theoretically undertake. But by the time the IPO occurs, the underwriter has already lined up sufficient buyers and there is no longer much if any risk, certainly not a level of risk justifying most of the gains of the IPO).

If Airbnb doubled on opening, should all the VCs + founders involve be pissed it was so badly mis-priced?

dlp211 6y ago

The VCs and founders still have plenty of their shares to cash in.

misiti3780 6y ago
sure - but someone fucked up right? the bankers ?
- dlp211 6y ago
  Not in anyway an authority on this, but I don't think so. They have to price the stock based on fundamentals and make a best guess. Would a different bank have priced it higher? Maybe marginally, but probably not double or more. Maybe someone with a better understanding can say something here but it seems like the way we do IPOs is not great. I'm not sure how to do it better, but I'm sure that there is a better way to do it. I guess this should be the next yCombinator startup. Disrupting the IPO landscape :P.
  - hyperation 6y ago
    SPAC could be the "better" way perhaps.
- gamblor956 6y ago
  Yes, if a company gains significantly (or drops significantly) in an IPO, the underwriter royally fucked up. In the old days, there would have been recriminations. These days, people just shrug and think it's acceptable that the financiers lock up most of the gains for economic value created (or, depending on your thoughts of Airbnb's business model, acquired) by others. It's one of the reasons Wall Street has fought so hard to prevent become fiduciaries again. If they were fiduciaries they couldn't get away with crap like this.
- rebelos 6y ago
  I think we can safely not blame the bankers for failing to assign a $100B valuation to a travel sector company that was valued at $31B before the pandemic.

nrmitchi 6y ago

The IPO price is for new shares which are created, and sold by the company. VCs + founders would have been diluted a bit by that (~8% I think?) but they typically[0] still own all of the shares that they did previously. [0] In some situations founders + VCs + early-employees can sell as part of the IPO itself. I do not know if that applied here.

gamblor956 6y ago

Yes. In the past, mispricing this badly would lead to recriminations for the underwriters, including lawsuits and lost business. For some reason, the financiers were able to convince the gullible tech founders that giving up 50% or more of the IPO to the financier's best buddies was a good thing. And in their greed, the founders gladly went along, screwing themselves and their employees in the process. (Theoretically, the underwriters are granted a pop because of the risk they theoretically undertake. But by the time the IPO occurs, the underwriter has already lined up sufficient buyers and there is no longer much if any risk, certainly not a level of risk justifying most of the gains of the IPO).