3 ms·
Except the majority of the Figma IPO was captured by banks due to it's severe pop. So while everyone made a lot of money, the overwhelming majority went to the
by alephnerd 1y ago
Except the majority of the Figma IPO was captured by banks due to it's severe pop. So while everyone made a lot of money, the overwhelming majority went to the underwriters [0].
The founding team at Figma would have gotten a similar amount much sooner if the acquisition was let thru OR if the underwriters didn't screw them over by underpricing at $33.
[0] - https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-underwriter-pricing https://pitchbook.com/news/articles/figma-ipo-pop-spotlight-...
- el_nahual 1y agoThe IPO "pop" is not captured by banks: it's captured by the banks customers that pre-buy at the IPO price. Basically, before an IPO, the underwriters take the company on a "roadshow" in which they pitch the IPO to potential buyers. There's a hierarchy of these: the best are very large buyers that place large orders and trade seldom. Pensions, sovereign wealth funds, etc. Those buyers then make offers ("I'll buy 50MM at $100"), which the bank uses to set the IPO price. The bank then gives them an allocation. If you're a high (10MM+) net worth individual that banks with one of the underwriters, you can often get an allocation in an IPO. The richer you are, the more of an allocation you can get. When an IPO pops, it's these people that get the benefit. The benefit for the company is that the stock is owned by prime people the bank selected: you crucially _don't_ want to just sell to the highest bidder if they are going to dump the stock immediately after the pop (or that's the theory, at least). They have stable shareholders with a vision aligned with management. The benefit to the bank is that they get to reward their customers with access to profitable trades--but the bank itself does not profit.
- SilverElfin 1y agoSeems undemocratic. Everyday folks can’t buy even though they would want to
- conradev 1y agoIt’s just a bulk discount: everyday folks simply can’t be relied upon to buy hundreds of millions of dollars the stuff and that’s what the company is selling. Little fish can buy in, but only if the big fish provide liquidity in the first place! In other words: someone needs to be paid to sell it and big buyers need to be incentivized to buy it. Ultimately the IPO price is driven by supply and demand with a limited supply: price will go down (a bit) when the lockout period ends and more supply comes online.
- deleted 1y ago[deleted]
- BrenBarn 1y agoSaying "big buyers need to be incentivized to buy it" is just another way of saying it's undemocratic. The democratic version would be that there are no big buyers and your IPO gets however much money it gets from small investors and that's it. There don't need to be any companies with a $45 billion IPO.
- virgilp 1y agoI feel like complaining about things being "undemocratic" is like complaining about a software system's architecture that "it's not microservices". Not everything needs to be - and some things would be actively harmed by making them "democratic". I wouldn't want drug approval to be a democratic process. Raising capital can be done "democratically" if the founders want to. They can use direct listing. IPO is an option, not an obligation.
- markdown 1y ago> Not everything needs to be Not everything, sure. But this one more than most, needs to be democratic. If you don't see the wealth inequality today in which the 1% own 50% of the worlds wealth, and you don't see where this is inevitably going to lead, then I don't know what to say. Stay woke at r/latestagecapitalism
- andruby 1y agoCapital and Finance was never democratic. And I doubt it ever will. It’s literally those with more money have more power.
- bornfreddy 1y agoIt is undemocratic, but it is capitalistic.
- tossandthrow 1y agoEven Adam Smith would argue that monopolies are bad - the fact that you are deacriminated upon to buy capital is the direct opposite of capitalism.
- hgomersall 1y agoAdam Smith meant free from rentiers (unearned income) when talking about "free markets". The term was appropriated by the neoliberals to mean free from government and ignored the original meaning.
- benreesman 1y agoI don't know why you're getting downvoted. You clearly read Smith and the downvoters clearly didn't. An Inquiry Into the Nature and Causes of The Wealth of Nations is like an anti-rentier pamphlet in most places. Ignore the haters, keep being right about books.
- ryanjshaw 1y agoWhat makes it undemocratic? What do you propose? A speculative free-for-all like with crypto meme coins?
- tossandthrow 1y agoIt is, it is yet another of the constructions that increases inequality and makes rich people richer. Yes, an ipo is volatile, it should be! You are literally pricing a company. Sigh, regardless, Thisnis again one of these ways where free markets are being smashed by monopolistic behavior - you can only be a part of the game if you already have enough.
- Zacharias030 1y agoI thought IPOs don‘t generally pop though this one has? You can buy VTI which takes about 7% allocation in every IPO, but I heard there is research by some folks at Harvard and practiced by dimensional fund advisors‘ funds that buying IPOs ~two years later is slightly better?
- ic_fly2 1y agoNot all IPOs pop
- mhh__ 1y agoThis is actually a funny thing for risk mgmt because a trader will say "I want a bajillion shares in this IPO", risk notice it and say "a bajillion!?" not realising that ask for 10x more than you think you'll get allocated. You also sometimes need to tactically trade with worse brokers so they will feel nicer during an IPO.
- wat10000 1y agoWhy don’t more IPOs do an auction to set the price? Trying to determine the “right” price ahead of time seems like a really bad way to do things.
- ptero 1y agoAn auction for IPO price is much easier to manipulate and can lead to much volatility. Pre-allocating to the entities that are not expected to sell quickly or participate in pump-and-dumps (pension funds, etc.) is considered a better long term strategy for the company, as the sister comment says.
- aschobel 1y agoDidn't Google solve this with their dutch auction?
- ptero 1y agoYes. But Google being Google it got top notch planning advice from world class auction experts that Goldman pulled in to advise them on the IPO. Most companies without such expert advice could step into some pitfalls. Just a guess, I am not an expert, but if my company were doing an IPO I would prefer it not to play financial games to eke out a percent of IPO price and instead focus on long term price stability to become a solid stock. My 2c.
- tekkk 1y agoFigma's stock quadripled in price from 33 to whatever it is now. Not saying it's good or bad, just that those gains must have been nice with effort akin to staring spreadsheets a while and babbling in meetings.
- wat10000 1y agoWhat makes an auction easier to manipulate or more volatile than a stock traded on the market?