4 ms·

Absolutely the wrong interpretation of this decision. Read the June 1 "Money Stuff" instead.

btown 3y ago
Here's the Money Stuff article: https://archive.is/qVei5#selection-4231.0-4231.5 https://archive.is/qVei5#selection-4231.0-4231.5 > And so what happened in Slack is that, on the first day, roughly 118 million shares were available for sale under Slack’s registration statement, and roughly 165 million shares were available for sale without registration. And if you bought stock, there was no way to know which kind of stock you bought: You didn’t buy directly from the company in an IPO process; you just bought on the stock exchange from an anonymous counterparty. If you bought “registered shares,” then technically you are allowed to sue Slack under section 11, just like in an IPO; if you bought “unregistered shares,” then you are not, just like in a mature public company. But there is no way of knowing which one you bought, so in practice you can’t sue under section 11. I don't see how this is materially different from Axios' analysis?
- crazygringo 3y ago
  > I don't see how this is materially different from Axios' analysis? Because Axios is saying: > This raises major questions about the future viability of direct listings, which some companies believe are a more efficient alternative to IPOs. / In practice, SCOTUS told investors in direct listings that they should not rely upon information contained within stock registration statements. Given that giant warning sign, it's unclear why anyone would buy into a direct listing, and thus why any company would attempt one. But this is ignoring the fact that you can still sue under section 10 (regular securities fraud) as opposed to section 11 (IPO fraud), which the Money Stuff article explains. People will be no less willing to purchase shares in a direct listing than they are to purchase shares in any public company any day of the week. Axios is claiming this will be a death knell for direct listings (their editorial opinion), while the Money Stuff article comes to no such conclusion. That's the material difference.
  - lolinder 3y ago
    Money Stuff doesn't say it'll be the end of direct listings, but they do say that section 10 is much harder to sue under and therefore removing section 11 limits the company's liability a lot. It doesn't seem that far fetched to go from there to "so investors will avoid the risk".
    - crazygringo 3y ago
      But it's still the same risk of normal everyday trading of shares. So it does seem pretty far-fetched to me. If you followed that logic, the entire stock market would grind to a halt.
      - lolinder 3y ago
        It's not quite the same, because with other stocks you have months or years of past performance to go on.
    - psidebot 3y ago
      But it also seems likely that companies will decide to take advantage of the reduced liability (especially now it's confirmed and not just theorized) and investors will just price in the risk difference.
      - jquery 3y ago
        In such a situation, honest companies will get hurt and dishonest companies will get helped. How is this good for the ecosystem? Reminds me of crypto ICOs.
- grumple 3y ago
  Presumably this isn't actually true though? Like if you buy 5 shares, someone else's brokerage account goes down by 5 shares at the same time. The transaction is recorded on both sides, isn't it? Should be possible to establish who the seller was.
  - SamReidHughes 3y ago
    If you make a mid-day order on an exchange you would be able to trace the transaction to a specific buyer and seller, because a specific counterparty got matched with your order. But if you exercise an option, or buy at the opening or closing auction, the shares are naturally commingled together.
    - HWR_14 3y ago
      I thought options were also explicitly assigned for fulfillment (randomly among those matching) so you could match it to specific shares if you wanted.
      - SamReidHughes 3y ago
        Brokers get told how many assignments they need to make and then they hand them out randomly to their customers. My impression was that the number of exercises gets added up by the OCC and there is no chain of permutations recorded tying an individual exercise to an assignment from one broker's customers to another. My belief here is based solely on having read some documents about the assignment process and having seen no reference to such record-keeping.
        HWR_14 3y ago
        Ah, I didn't realize the OCC commingled everyone's orders like that. Somehow I thought they were acting as an insurer on a bunch of 1 on 1 transactions. But I'll admit my understanding is probably incorrect in light of your specific knowledge.
        3y ago
Sniffnoy 3y ago
If you're referring to an article that's online, it would be helpful to link to it. It would appear to be this one: https://www.bloomberg.com/opinion/articles/2023-06-01/ai-bots-are-coming-to-finance https://www.bloomberg.com/opinion/articles/2023-06-01/ai-bot...
- Tyr42 3y ago
  I think most of us get it via email as you can avoid a Bloomberg subscription that way. But yes, I think that's the one.

Here's the Money Stuff article: https://archive.is/qVei5#selection-4231.0-4231.5 https://archive.is/qVei5#selection-4231.0-4231.5 > And so what happened in Slack is that, on the first day, roughly 118 million shares were available for sale under Slack’s registration statement, and roughly 165 million shares were available for sale without registration. And if you bought stock, there was no way to know which kind of stock you bought: You didn’t buy directly from the company in an IPO process; you just bought on the stock exchange from an anonymous counterparty. If you bought “registered shares,” then technically you are allowed to sue Slack under section 11, just like in an IPO; if you bought “unregistered shares,” then you are not, just like in a mature public company. But there is no way of knowing which one you bought, so in practice you can’t sue under section 11. I don't see how this is materially different from Axios' analysis?

crazygringo 3y ago
> I don't see how this is materially different from Axios' analysis? Because Axios is saying: > This raises major questions about the future viability of direct listings, which some companies believe are a more efficient alternative to IPOs. / In practice, SCOTUS told investors in direct listings that they should not rely upon information contained within stock registration statements. Given that giant warning sign, it's unclear why anyone would buy into a direct listing, and thus why any company would attempt one. But this is ignoring the fact that you can still sue under section 10 (regular securities fraud) as opposed to section 11 (IPO fraud), which the Money Stuff article explains. People will be no less willing to purchase shares in a direct listing than they are to purchase shares in any public company any day of the week. Axios is claiming this will be a death knell for direct listings (their editorial opinion), while the Money Stuff article comes to no such conclusion. That's the material difference.
- lolinder 3y ago
  Money Stuff doesn't say it'll be the end of direct listings, but they do say that section 10 is much harder to sue under and therefore removing section 11 limits the company's liability a lot. It doesn't seem that far fetched to go from there to "so investors will avoid the risk".
  - crazygringo 3y ago
    But it's still the same risk of normal everyday trading of shares. So it does seem pretty far-fetched to me. If you followed that logic, the entire stock market would grind to a halt.
    - lolinder 3y ago
      It's not quite the same, because with other stocks you have months or years of past performance to go on.
  - psidebot 3y ago
    But it also seems likely that companies will decide to take advantage of the reduced liability (especially now it's confirmed and not just theorized) and investors will just price in the risk difference.
    - jquery 3y ago
      In such a situation, honest companies will get hurt and dishonest companies will get helped. How is this good for the ecosystem? Reminds me of crypto ICOs.
grumple 3y ago
Presumably this isn't actually true though? Like if you buy 5 shares, someone else's brokerage account goes down by 5 shares at the same time. The transaction is recorded on both sides, isn't it? Should be possible to establish who the seller was.
- SamReidHughes 3y ago
  If you make a mid-day order on an exchange you would be able to trace the transaction to a specific buyer and seller, because a specific counterparty got matched with your order. But if you exercise an option, or buy at the opening or closing auction, the shares are naturally commingled together.
  - HWR_14 3y ago
    I thought options were also explicitly assigned for fulfillment (randomly among those matching) so you could match it to specific shares if you wanted.
    - SamReidHughes 3y ago
      Brokers get told how many assignments they need to make and then they hand them out randomly to their customers. My impression was that the number of exercises gets added up by the OCC and there is no chain of permutations recorded tying an individual exercise to an assignment from one broker's customers to another. My belief here is based solely on having read some documents about the assignment process and having seen no reference to such record-keeping.
      - HWR_14 3y ago
        Ah, I didn't realize the OCC commingled everyone's orders like that. Somehow I thought they were acting as an insurer on a bunch of 1 on 1 transactions. But I'll admit my understanding is probably incorrect in light of your specific knowledge.
        3y ago

Sniffnoy 3y ago

If you're referring to an article that's online, it would be helpful to link to it. It would appear to be this one: https://www.bloomberg.com/opinion/articles/2023-06-01/ai-bots-are-coming-to-finance https://www.bloomberg.com/opinion/articles/2023-06-01/ai-bot...

Tyr42 3y ago
I think most of us get it via email as you can avoid a Bloomberg subscription that way. But yes, I think that's the one.