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No, but they should have a stable exchange with which to go public. I'm not an economist, but to me it makes sense that factors such as confidence would greatly
by lowboy 14y ago
No, but they should have a stable exchange with which to go public. I'm not an economist, but to me it makes sense that factors such as confidence would greatly affect the price of a stock, not just in the short term. The price of a company's stock isn't just representative of its value - all the trading and expected trading of that stock plays a factor.
You could argue that it isn't a good system because it places less value on the companies being traded and more on the effects of trading itself, but within the current system I think people have a right to complain about a poorly-executed IPO.
- chimeracoder 14y agoSee my comment above. If you assume that the underlying value of Facebook hasn't changed in the last week (a reasonable assumption - remember, we're dealing with the underlying value of the company, not the value of the stock on any given day), then there would be no reason for a bump to occur on the first day of trading except that the stock was incorrectly priced. The reason that a 'bump' occurs is that money is being left at the table - ideally, stocks should exhibit no bump, because that means that the company has priced their stock correctly. Any bump means that traders are reaping the profit of the increase in the stock's value, and that profit is what the company was seeking to gain by going public.
- lowboy 14y agoRight, and I agree that the underlying value of FBComp hasn't changed. But that variability in the correctness of pricing of a stock is part of the game, is it not? As is the mis-estimation of a company's "true worth" by investors. If the problems with NASDAQ weren't present, and there was a first day bump as expected, I could see that instilling confidence in investors, driving demand for the stocks. Hence nanex's strongly worded quote about ripple effects. Do you disagree with that? Ultimately we'll never know what would have happened, but the negative ripple effects seem plausible.
- Drbble 14y agoThere is an argument that the IPO buyers from the roadshow deserve a premium for buying in bulk at a predetermined price before they have the full information of the open market.