The decline of the $10 million IPO, and why it matters
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The decline of the $10 million IPO, and why it matters
1–10 of 27 posts
Re: The decline of the $10 million IPO, and why it matters
#2very good article...but I think it's underestimating the culture shift of companies not even considering IPOs in that range
Re: The decline of the $10 million IPO, and why it matters
#3I'm not sure I understand point #2 (decimalization). Can someone explain what he is getting at?
Re: The decline of the $10 million IPO, and why it matters
#4I'm not sure I understand point #2 (decimalization). Can someone explain what he is getting at?
Stocks used to be priced in eighths of a dollar. So if a stock was selling for $1.50, the next increment up was $1.625 and the next step down was $1.375. They are now priced down to the penny, so a $1.50 stock can go directly to $1.51 or $1.49.
I'm not entirely sure why he cites this as a bad thing, but I'm assuming that there's some arbitrage opportunity to value investors when dealing with eighths of a dollar (since if a stock was priced at $1.50 but was really worth $1.55, you'd be getting $0.05 of "free" value by buying it).
Re: The decline of the $10 million IPO, and why it matters
#5very good article...but I think it's underestimating the culture shift of companies not even considering IPOs in that range
I'm not sure it's possible to disambiguate his point and the culture shift. i.e. perhaps the culture has shifted because of the issues he's described.
Re: The decline of the $10 million IPO, and why it matters
#6I'm not sure I understand point #2 (decimalization). Can someone explain what he is getting at?
Stocks used to be priced in eighths of a dollar. So if a stock was selling for $1.50, the next increment up was $1.625 and the next step down was $1.375. They are now priced down to the penny, so a $1.50 stock can go directly to $1.51 or $1.49. I'm not entirely sure why he cites this as a bad thing, but I'm assuming that there's some arbitrage opportunity to value investors when dealing with eighths of a dollar (sinc…
Don't know if it's in any way the cause of anything related to a decline in IPO, but this spread is what the banks make money on and what enables them to do what they do, effectively a measure of their margin on trades. Going from an eighth to a hundredth just means their margins effectively were reduced, but was probably a result of an increase in volume / trading activity.
Re: The decline of the $10 million IPO, and why it matters
#7I'm not sure I understand point #2 (decimalization). Can someone explain what he is getting at?
Stocks used to be priced in eighths of a dollar per share (that is, 12.5 cents). A few years ago, the exchanges switched to pricing them in cents, like everything else. This was "decimalization".
What's not obvious is why this guy thinks that this altered IPOs in any meaningful way. (I'm not even sure why he thinks it altered trading volumes, which is how he claims it affected IPOs.)
But it fits a different pattern, in this article. It turns out that, at least according to this guy, every single change in the capital market structure since, I don't know, 1992 was somehow bad for small IPOs.
Item #3 is "the rise of the internet brokerages." You might think that having a broader customer base would make it easier to sell stuff, but no. Bad for IPOs!
Item #5 is Eliot Spitzer reining in fraudulent "analysis" at various Wall Street firms, which was getting people to invest in stuff they didn't otherwise understand. (Which, in the world I live in, happened to a great extent through internet brokerages, but ... never mind.) It turns out that chasing fraud from the marketplace is Bad for IPOs!
And so forth.
There are some good points here --- Sarbanes-Oxley regulation is a big deal, and so is consolidation on Wall Street. But some of this other stuff really does strike me as a bit of a stretch.
Re: The decline of the $10 million IPO, and why it matters
#8I'm not sure I understand point #2 (decimalization). Can someone explain what he is getting at?
Stocks used to be priced in eighths of a dollar per share (that is, 12.5 cents). A few years ago, the exchanges switched to pricing them in cents, like everything else. This was "decimalization". What's not obvious is why this guy thinks that this altered IPOs in any meaningful way. (I'm not even sure why he thinks it altered trading volumes, which is how he claims it affected IPOs.) But it fits a different pattern,…
Item #3 makes sense in that a lot of 'casual money' or individual traders do not have access to information about IPOs much less the ability to get involved in the offering. These investors previously were forced to use an advisor or at the very least a broker who is far more in tune with what is new on the market then the individual typically is.
Re: The decline of the $10 million IPO, and why it matters
#9This entire article is just a bunch of moaning and bitching about how things are not like they used to be back in the olden times when stock brokers could make easy money without being too smart or working too hard by just answering the phone, executing orders and taking bribes for "research." (Note that stockbrokers can and still do make a lot of money nowadays, they just need to be much smarter and trickier about it.)
There's a lot of wrong things in there but let me point out the most obvious. He talks about the abundance of 10 million ipo's in the 80's and 70's and the dearth of them today without even mentioning inflation. Let's take the only concrete example he provided: that of Intel which had an 8 million ipo in '71. In 2010 money, by using the CPI, this is 43 million (and note that the CPI tends to underestimate inflation). Are there 40 million IPO's today? Yes there are.
This small list listing only the most recent IPOs on the NASDAQ shows at least two 40 mill IPOs:
http://www.nasdaq.com/reference/IPOs.stm
So a mere cursory examination of inflation completely destroys the only concrete example he provided.
Re: The decline of the $10 million IPO, and why it matters
#10I'm not sure I understand point #2 (decimalization). Can someone explain what he is getting at?
Stocks used to be priced in eighths of a dollar. So if a stock was selling for $1.50, the next increment up was $1.625 and the next step down was $1.375. They are now priced down to the penny, so a $1.50 stock can go directly to $1.51 or $1.49. I'm not entirely sure why he cites this as a bad thing, but I'm assuming that there's some arbitrage opportunity to value investors when dealing with eighths of a dollar (sinc…
Taken together with his other points, I think the author is under the impression that it was the "Boiler Room" operations peddling penny stocks that were driving IPOs. Trading in eights was probably good for brokers skimming money from transactions, but I can't see how decimalization can be considered bad for investors.