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Apparently Twitter thought it was a good deal: http://www.cnbc.com/id/101110025 http://www.cnbc.com/id/101110025 Banks' incentives are misaligned: a higher sha

Apparently Twitter thought it was a good deal: http://www.cnbc.com/id/101110025 http://www.cnbc.com/id/101110025 Banks' incentives are misaligned: a higher share price raises fees collected from underwriting since they get a % of total money collected in the IPO; a lower share price leads to commissions, goodwill and management fees from the private wealth/managed fund clients. Could anyone elaborate on how these concerns are/may be separated to keep the process transparent?

this_user 13y ago
The underwriter's goal is to facilitate a successful IPO. There are obviously different interests at play. The company and its investors would like to say as high a price as possible. The new public investors the shares are being sold to would like to see as big a profit potential as possible. The bank's job consists of choosing a sensible price point for all parties involved and advertising the offering so as to generate interest in the shares. Once the actual IPO happens, the public is able to see whether or not the bank did a good job. This in turn is important for the bank's reputation and ability to acquire future deals. The FB IPO was widely considered a failure because the initial share price was unsustainable. The underwriters had to buy massive amounts of shares on the IPO day to stabilise the price above the initial level. This, however, couldn't avoid the crash over the next months which lead to early public investors being underwater. Morgan Stanley's (as well as Nasdaq's) reputation took a big hit thanks to this and it will haunt them for quite a while. It's also the reason why the TWTR IPO is lead by Goldman Sachs and the shares trade on the NYSE.
- acchow 13y ago
  Successful for who? The existing insiders? The underwriter? The new investors? (subscribers). The FB IPO certainly wasn't a failure in the capital raising sense. Fb raised a lot of capital than if they had IPO'd at $25 outright and the stock price had stayed there.

this_user 13y ago

The underwriter's goal is to facilitate a successful IPO. There are obviously different interests at play. The company and its investors would like to say as high a price as possible. The new public investors the shares are being sold to would like to see as big a profit potential as possible. The bank's job consists of choosing a sensible price point for all parties involved and advertising the offering so as to generate interest in the shares. Once the actual IPO happens, the public is able to see whether or not the bank did a good job. This in turn is important for the bank's reputation and ability to acquire future deals. The FB IPO was widely considered a failure because the initial share price was unsustainable. The underwriters had to buy massive amounts of shares on the IPO day to stabilise the price above the initial level. This, however, couldn't avoid the crash over the next months which lead to early public investors being underwater. Morgan Stanley's (as well as Nasdaq's) reputation took a big hit thanks to this and it will haunt them for quite a while. It's also the reason why the TWTR IPO is lead by Goldman Sachs and the shares trade on the NYSE.

acchow 13y ago
Successful for who? The existing insiders? The underwriter? The new investors? (subscribers). The FB IPO certainly wasn't a failure in the capital raising sense. Fb raised a lot of capital than if they had IPO'd at $25 outright and the stock price had stayed there.