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People who know better can answer this more authoritatively. My two cents are: 1. Stocks are never priced "appropriately" in the US. Companies rarely adopt the
by luser001 14y ago
People who know better can answer this more authoritatively. My two cents are:
1. Stocks are never priced "appropriately" in the US. Companies rarely adopt the Google-style book-building process (kinda like an auction).
2. FB like others was placed privately. What incentive does an investor at the roadshow have to buy it before the markets open? The incentive is the probability (nay near-certaintly) of an opening day "pop".
3. It's common for underwriters to have a 180-day lock in periods for employees who want to sell their newly-public stock (Linkedin had it iirc). This is another way to increase demand for the shares sold during the roadshow.
- gojomo 14y agoStocks are never priced "appropriately" in the US And yet, big companies and time can change the rules. Google used the Dutch auction. Facebook has long been traded on non-public markets. Facebook also demanded lower fees from underwriters, and less first-day-pop 'money left on the table' for initial-distribution purchasers. A negligible 'pop' could mean FB's strategy worked beautifully, capturing the maximum amount of capital for their own goals. It doesn't send the same signal as when another company, which needed more help from the underwriters and media, has a stable first-day price.