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Fear not citizen! I am protecting you from yourself for the price of a small fee. You should be glad I'm here to rubber stamp your investment decisions!

echelon 6y ago
I appreciate your sarcasm, but we all know it isn't just a small fee. Airbnb lost out on over half the money they could have raised. edit: Priced to the banks at $68/share [1], opened to the public at $146/share the next day [2]. Free money for the banks, missed opportunity for the Airbnb balance sheet, and continued shut out of retail investors (even those with a large net worth). This keeps happening. Snowflake and C3.ai left over 100% on the table to the bankers, and DoorDash left almost as much [3]. Bankers continue to get free money that the companies could use themselves for hiring and other expenses. [1] https://www.nytimes.com/2020/12/09/business/airbnb-ipo-price.html https://www.nytimes.com/2020/12/09/business/airbnb-ipo-price... [2] https://www.barrons.com/articles/airbnb-prices-ipo-at-68-a-share-raising-3-5-billion-51607560437 https://www.barrons.com/articles/airbnb-prices-ipo-at-68-a-s... [3] https://www.fool.com/investing/2020/12/20/why-i-didnt-go-all-in-on-the-airbnb-ipo/ https://www.fool.com/investing/2020/12/20/why-i-didnt-go-all...
- leetrout 6y ago
  First I’ve heard of this - do you have a source handy?
  - deadmutex 6y ago
    I think OP is alluding to the fact there was a big pop on IPO day (which indicates that the IPO was mispriced). Though that is not a "fee", but money left on the table for the company.
    - agency 6y ago
      And the pop in Airbnb's case was pretty enormous. They priced at $68 and closed on the first day at $144.71
      - asdfasgasdgasdg 6y ago
        I continue to be flabbergasted any time these companies don't run an auction. Ideally N auctions, spread out through the day.
        renewiltord 6y ago
        Google did. The banks liked to release articles saying it was a disaster but they were pricing it lower than that so overall Google came out ahead.
  - chrisked 6y ago
    He’s referring to Goldman most likely deliberately underpricing the stock. During the IPO the investment bank gives access to certain folks: Their clients. They doubled their money almost risk free since they know demand.
    - nescioquid 6y ago
      Right. That's why I always thought buying IPOs is a bit of a mug's game.
      - alisonkisk 6y ago
        Buying anything volatile is a mug's game. An IPO is infinitely volatile since it has no history.
    - leetrout 6y ago
      I didn’t know that was a thing.
    - xyzzyz 6y ago
      > They doubled their money almost risk free since they know demand. They only did double their money if they can sell without pushing the price down. That's not easy to do for institutional investors.
      - s17n 6y ago
        In fact, institutional investors often make informal agreements to not flip the shares in exchange for their allocations.
- deleted 6y ago
  [deleted]
- cortesoft 6y ago
  This is not the same as an underwriting fee, and there is still the possibility that a company underprices their stock offering as well.
- Multiplayer 6y ago
  This. All to the benefit of the investment bank and their best customers who are rewarded with allocations of “hot” ipo’s. How I know this: I have been the recipient of allocations in the past.
  - JackFr 6y ago
    In return for telling them how much your interested and at what price.
    - rocqua 6y ago
      Markets have order books for that kind of thing. In fact, that is what a direct listing is based on.
    - Multiplayer 6y ago
      No, they tell you what the price will be at the last moment. They do indicate a range. They don’t really care what you think about the price.
- xyzzyz 6y ago
  An IPO pop does not necessarily mean that any money has been left on the table: just because some shares trade at $146 doesn't mean that all of them could have been sold for the same price. The demand curves slope downwards. However, when the pop is as large as it was in the case of Airbnb, it does seem like they could have raised more cash.
odiroot 6y ago
> small fee A generous 7%. I would like a small cut of this small fee.

echelon 6y ago

I appreciate your sarcasm, but we all know it isn't just a small fee. Airbnb lost out on over half the money they could have raised. edit: Priced to the banks at $68/share [1], opened to the public at $146/share the next day [2]. Free money for the banks, missed opportunity for the Airbnb balance sheet, and continued shut out of retail investors (even those with a large net worth). This keeps happening. Snowflake and C3.ai left over 100% on the table to the bankers, and DoorDash left almost as much [3]. Bankers continue to get free money that the companies could use themselves for hiring and other expenses. [1] https://www.nytimes.com/2020/12/09/business/airbnb-ipo-price.html https://www.nytimes.com/2020/12/09/business/airbnb-ipo-price... [2] https://www.barrons.com/articles/airbnb-prices-ipo-at-68-a-share-raising-3-5-billion-51607560437 https://www.barrons.com/articles/airbnb-prices-ipo-at-68-a-s... [3] https://www.fool.com/investing/2020/12/20/why-i-didnt-go-all-in-on-the-airbnb-ipo/ https://www.fool.com/investing/2020/12/20/why-i-didnt-go-all...

leetrout 6y ago
First I’ve heard of this - do you have a source handy?
- deadmutex 6y ago
  I think OP is alluding to the fact there was a big pop on IPO day (which indicates that the IPO was mispriced). Though that is not a "fee", but money left on the table for the company.
  - agency 6y ago
    And the pop in Airbnb's case was pretty enormous. They priced at $68 and closed on the first day at $144.71
    - asdfasgasdgasdg 6y ago
      I continue to be flabbergasted any time these companies don't run an auction. Ideally N auctions, spread out through the day.
      - renewiltord 6y ago
        Google did. The banks liked to release articles saying it was a disaster but they were pricing it lower than that so overall Google came out ahead.
- chrisked 6y ago
  He’s referring to Goldman most likely deliberately underpricing the stock. During the IPO the investment bank gives access to certain folks: Their clients. They doubled their money almost risk free since they know demand.
  - nescioquid 6y ago
    Right. That's why I always thought buying IPOs is a bit of a mug's game.
    - alisonkisk 6y ago
      Buying anything volatile is a mug's game. An IPO is infinitely volatile since it has no history.
  - leetrout 6y ago
    I didn’t know that was a thing.
  - xyzzyz 6y ago
    > They doubled their money almost risk free since they know demand. They only did double their money if they can sell without pushing the price down. That's not easy to do for institutional investors.
    - s17n 6y ago
      In fact, institutional investors often make informal agreements to not flip the shares in exchange for their allocations.
deleted 6y ago
[deleted]
cortesoft 6y ago
This is not the same as an underwriting fee, and there is still the possibility that a company underprices their stock offering as well.
Multiplayer 6y ago
This. All to the benefit of the investment bank and their best customers who are rewarded with allocations of “hot” ipo’s. How I know this: I have been the recipient of allocations in the past.
- JackFr 6y ago
  In return for telling them how much your interested and at what price.
  - rocqua 6y ago
    Markets have order books for that kind of thing. In fact, that is what a direct listing is based on.
  - Multiplayer 6y ago
    No, they tell you what the price will be at the last moment. They do indicate a range. They don’t really care what you think about the price.
xyzzyz 6y ago
An IPO pop does not necessarily mean that any money has been left on the table: just because some shares trade at $146 doesn't mean that all of them could have been sold for the same price. The demand curves slope downwards. However, when the pop is as large as it was in the case of Airbnb, it does seem like they could have raised more cash.

odiroot 6y ago

> small fee A generous 7%. I would like a small cut of this small fee.