3 ms·
Nice insight there, and it makes sense. I guess the question is, are there good reasons for banking services to be so expensive, besides the inherent power adva
by creamyhorror 14y ago
Nice insight there, and it makes sense. I guess the question is, are there good reasons for banking services to be so expensive, besides the inherent power advantages that the players possess? And if I may be allowed to repeat a common trope, all that wealth easily buys or wins the political influence necessary to keep the market regulations highly favorable to them.
- tomkarlo 14y ago50 or 100 years ago, there was real risk inherent in being an equity underwriter. IPO underwriters purchase the equity from the issuer and resell it to the market, and in theory that creates material risk that they might not be able to resell it at a profit. These days, they've pre-sold the equity (usually several times over) to institutional investors before they do the deal, so the risk is pretty minimal. Just look at the average first-day pop (something like 20%?) on large IPOs and you can see how little risk they're taking.