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Interesting... Care to explain that?
by arnold_palmur 13y ago
Interesting... Care to explain that?
- felixgallo 13y agoThe purpose of an IPO is to raise money for the company. In order to do this, they say "our stock is worth price X" and issue it out. The people who get to fill orders at price X are overwhelmingly, by volume, the bankers who are helping out with the IPO -- who often are also the people who help set the price. Later in the day, if the stock jumps to the 'correct' (market-valued) price Y, then (Y-X) represents the profit that the purchasers made at X can realize, and also represents the money that the company could have gotten if they had properly priced the stock at Y to begin with. In this case, the stock went from 26 to 44. Bankers made a 69% profit off their allocation at 26. If Twitter had priced at 44, they would have an extra 1.2 billion dollars in their hands and not the bankers'. The bankers did this to eToys too (http://lawprofessors.typepad.com/mergers/2013/03/etoys-and-the-rigged-ipo-game.html http://lawprofessors.typepad.com/mergers/2013/03/etoys-and-t...). Full disclosure: I worked there at the time.