3 ms·

Morgan Stanley makes a ton of money this quarter, while telling their customers that they should stay in for the long term (5+ years). It is too bad those peop

by rondon1 14y ago

Morgan Stanley makes a ton of money this quarter, while telling their customers that they should stay in for the long term (5+ years). It is too bad those people are getting screwed by Wall St. But a fool and his money are soon separated, or whatever that quote is.

ajays 14y ago
On the other hand: MS also spent ~ $3B providing a floor on Friday by buying up FB shares in the open market. Since FB is down 11%, they've already lost about $330M on that. Not chump change even for MS.
- tomp 14y ago
  The shares they bought were just to cover their short position. They didn't loose a bit, they just didn't profit even more (which they would if the share price would go up).
  - chucknthem 14y ago
    You mean they would profit more if the price would go *down? The way I understand it, you make money on a short when the price goes down because you can buy back the shares you shorted at a lower price.
    - tomp 14y ago
      No, see the link in the comment below. If the shares go up, the underwriter can close his short position by buying a number of shares from the IPO company, at the IPO price (which is below the market price), therefore effectively profiting.
  - ajays 14y ago
    I don't think it's legal for an underwriter to short the price of a security that they're bringing to the market.
    - jmaygarden 14y ago
      That's simply not true. The SEC allows this behavior to stabilize the price. http://en.wikipedia.org/wiki/Greenshoe http://en.wikipedia.org/wiki/Greenshoe
      - deleted 14y ago
        [deleted]
- jpdoctor 14y ago
  > On the other hand: MS also spent ~ $3B providing a floor on Friday by buying up FB shares in the open market. You don't understand the greenshoe: MS didn't spend a dime. That money came from selling initial shares from the "overallotment". Essentially, suckers who paid too much. If the price had stayed above the IPO, that money would have gone to FB. Since it dropped below, MS is plowing the money (on behalf of FB) into manipulating the share price. Edit: My more detailed explanation here - http://news.ycombinator.com/item?id=3996536 http://news.ycombinator.com/item?id=3996536

by rondon1 14y ago

ajays 14y ago

On the other hand: MS also spent ~ $3B providing a floor on Friday by buying up FB shares in the open market. Since FB is down 11%, they've already lost about $330M on that. Not chump change even for MS.

tomp 14y ago
The shares they bought were just to cover their short position. They didn't loose a bit, they just didn't profit even more (which they would if the share price would go up).
- chucknthem 14y ago
  You mean they would profit more if the price would go *down? The way I understand it, you make money on a short when the price goes down because you can buy back the shares you shorted at a lower price.
  - tomp 14y ago
    No, see the link in the comment below. If the shares go up, the underwriter can close his short position by buying a number of shares from the IPO company, at the IPO price (which is below the market price), therefore effectively profiting.
- ajays 14y ago
  I don't think it's legal for an underwriter to short the price of a security that they're bringing to the market.
  - jmaygarden 14y ago
    That's simply not true. The SEC allows this behavior to stabilize the price. http://en.wikipedia.org/wiki/Greenshoe http://en.wikipedia.org/wiki/Greenshoe
    - deleted 14y ago
      [deleted]
jpdoctor 14y ago
> On the other hand: MS also spent ~ $3B providing a floor on Friday by buying up FB shares in the open market. You don't understand the greenshoe: MS didn't spend a dime. That money came from selling initial shares from the "overallotment". Essentially, suckers who paid too much. If the price had stayed above the IPO, that money would have gone to FB. Since it dropped below, MS is plowing the money (on behalf of FB) into manipulating the share price. Edit: My more detailed explanation here - http://news.ycombinator.com/item?id=3996536 http://news.ycombinator.com/item?id=3996536