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Buying shares at the IPO hoping for an immediate profit means that you are betting that the underwriter has underpriced the shares. That seems unlikely.
by mikequinlan 3y ago
Buying shares at the IPO hoping for an immediate profit means that you are betting that the underwriter has underpriced the shares. That seems unlikely.
- roughly 3y agoThat’s common practice. Most of the time, the shares are sold before the IPO to financial institutions at the list price to guarantee a certain volume of sale and liquidity for the IPOing company. Those institutions expect a first day pop, so it’s common for the list price to be below the expected market price. It also looks better for the company if the stock goes up on day one. None of that maximizes cash to the company, but there are other considerations (and actors) in play.