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Re: TWTR

#231

Post by ChuckMcM »

corford wrote: post #209
ChuckMcM wrote: post #198

Earlier quoted context omitted.

I think you fundamentally misunderstand the process but that is ok, its not all that straight forward. The transaction here is between risk takers (venture capitalists and investment banks) and risk pricers (people who buy stock). Nobody is getting "ripped off" as long as everyone is following the rules set down by the SEC. Investors put money at risk. You know that because you've been here on HN a couple of years an…

Thanks Chuck for the thoughtful reply. If anything, I think I need to direct my negativity towards the public stocks and shares system as whole (i.e. it just appears to boil down to a numbers and sentiment game that doesn't seem to be a rational way to determine a company's "real" value at any given point in time) rather than looking for cynical players ripping people off. Looking at it another way: the whole thing i…

You're welcome of course, I suggest though that you might want to think about this a bit,

" it just appears to boil down to a numbers and sentiment game that doesn't seem to be a rational way to determine a company's "real" value at any given point in time"

The interesting question is "What makes this important to you?"

I ask because there is absolutely a rational way to determine a company's value, it involves analyzing its market, its product, its ability to grow and develop and the its ability to stay ahead of others who would try to do the same thing.

Putting the world "real" in scare quotes suggests that there is a large difference between a value that you came up with internally and the one being exhibited on the stock market today. This isn't a whole lot different than the 'SnapChat is worthless' discussion of a few days ago. It also isn't surprising since different people value things in different ways. But it is important to recognize that you are not wrong, if it is worthless to you, it is. And that is just as valid an assesment of the company as one that thinks it's the best thing since the wheel.

So why is it important?

Re: TWTR

#232

Post by clauretano »

blisterpeanuts wrote: post #106
the_watcher wrote: post #33

Earlier quoted context omitted.

There was an employee lockup of Facebook stock, if I remember correctly, so Facebook employees were not selling. Please correct me if I misunderstood something.

Interesting; how is it that employees are able to trade right after the IPO? I thought there was a waiting period for insiders.

not every employee is an insider. Public companies that issue stock to employees can limit the number of people that are made privy to non-public information about the performance of the company, such that some/many employees are allowed to freely trade.

Re: TWTR

#233

Post by YZF »

ChuckMcM wrote: post #198
corford wrote: post #82

Can someone with more clue please tell me that the following cynical thought I keep having is wrong and laughably misinformed (and then explain why)? Twitter's investors (who have plowed hundreds of millions in to a loss making company) decide to sell some of their stock at $26/share (after consulting with banks to arrive at this price). This will make right the losses they've experienced so far and pass the problem…

I think you fundamentally misunderstand the process but that is ok, its not all that straight forward. The transaction here is between risk takers (venture capitalists and investment banks) and risk pricers (people who buy stock). Nobody is getting "ripped off" as long as everyone is following the rules set down by the SEC. Investors put money at risk. You know that because you've been here on HN a couple of years an…

The underwriters who will make hundreds of millions here... (EDIT, well, many millions at least) What sort of risk are they taking that justifies their rewards and how does it help the economy? And the individual bankers who will take millions of dollars in bonuses home because they get paid for the 12th time and don't get penalized for the 11 others, what sort of innovation did they contribute to the world?

I think we all understand the deal with investors who get in early and invest money in something that has a chance to fail will make money if it succeeds.

The IPO is a suckers game. It says me as an insider value the company less then you as an information limited outsider. If Twitter is worth $50 bucks a share why were its investors willing to part with their stock for $26 a share only yesterday? Sometimes you can profit even in the presence of this information disparity because the company will outperform its expectations, but now you're 1 out of 144...

:-)

EDIT: I think a solution to that is perhaps a combination forcing companies to go public sooner (limit IPO valuations or spread the share sale over longer periods), combine with more limits on insiders, more and earlier disclosure and perhaps combine that with a more KickStarter like model - eliminate the middle man.

Re: TWTR

#234

Post by fotbr »

clarky07 wrote: post #148
yummyfajitas wrote: post #91

Earlier quoted context omitted.

What does it mean for a market to be "highly irrational"? Normally the term "irrational" is applied to actors, while "efficient" refers to markets. Are you suggesting markets are not efficient? In that case, when can we expect you to become extremely wealthy from your inefficiency-proving strategy? (Claiming the EMH is false is equivalent to claiming that such a strategy exists.) Incidentally, when an actor behaves i…

I don't know if he is, but I would certainly suggest that markets are not efficient. Not even close. Google had a 40 billion dollar swing in valuation in a day last month. Were they really worth 40 billion more that day? Apple lost 300 billion in market cap in a matter of 6 months. Either they weren't worth that much at the peak, or they weren't worth that little at the bottom. There is no way you could ever convince…

> That being said, if I had a magic formula for instant huge wealth you can be damn sure I wouldn't be sharing it.

But I'd be selling it, and you can find out how by buying my book for the low, limited time price of three payments of $99.99. If you act now, we'll also throw in this great place-mat shaped like a $3 bill, and a ring-tone for your phone that sounds like money. Just pay separate shipping and handling.

Re: TWTR

#235

Post by morgante »

the_watcher wrote: post #52
darrelld wrote: post #44

Earlier quoted context omitted.

Not an expert either, but my guess? Facebook had its IPO hayday and Facebook is now another company listed on the market. Markets are mostly down today and Facebook is following the trend. Twitter is a hot new IPO and people are jumping on early in the hopes of it rising in price.

Got it. As someone who only owns one stock, I guess I don't look at the market as a whole enough. That makes more sense than anything else.

I also highly suggest you own more than one stock.

Re: TWTR

#236

Post by jmackinn »

YZF wrote: post #233
ChuckMcM wrote: post #198

Earlier quoted context omitted.

I think you fundamentally misunderstand the process but that is ok, its not all that straight forward. The transaction here is between risk takers (venture capitalists and investment banks) and risk pricers (people who buy stock). Nobody is getting "ripped off" as long as everyone is following the rules set down by the SEC. Investors put money at risk. You know that because you've been here on HN a couple of years an…

The underwriters who will make hundreds of millions here... (EDIT, well, many millions at least) What sort of risk are they taking that justifies their rewards and how does it help the economy? And the individual bankers who will take millions of dollars in bonuses home because they get paid for the 12th time and don't get penalized for the 11 others, what sort of innovation did they contribute to the world? I think…

The undrewriters don't always come out doing so well. Take a look at the Facebbok IPO as an example. They didn't end up selling all of the stock that was issued in the IPO and had to buy up stock back from the market at elevated prices in order to keep the stock from plummeting on the first day. They still made money but not what they expected.

As for the insider vs outsider. In order to issue an IPO, a number of stocks are agreed to be issued. These stock either come from the company issuing more shares and diluting the value to current stock holders and the company receives the money from the new share purchase, or the stock holders offer up some of their stock to be sold in which case they receive the money. I believe is usually mix of the two. The current stock holders don't offer all of their shares up. Just enough (I believe this is set by the SEC) to enter the market.

The underwriter assumes a large risk and for the portion of the stock that goes through them to market, they are paid the $20 difference ($26 to $46). As well they facilitate the actual sale of the shares. This is not an easy task (again see the technical issues with the Facebook IPO).

So in the end the 11 rounds of investors get $26 for some of their shares, in order for the rest of them to be worth $46 or now $50. They are also now allowed to sell those remaining shares on the open market. Something they were not able to do before the IPO.

No one is getting screwed here. There is a very big pie, and everyone, from the first investor to the undrewriter, gets a piece.

Re: TWTR

#237

Post by nerfhammer »

adventured wrote: post #194
nerfhammer wrote: post #174

Earlier quoted context omitted.

This is total nonsense

No it's exactly what caused the massive asset inflation across all major assets in the US economy in the last four years. Look up the perfect correlation between the S&P and the Fed's pomo shots, and its balance sheet expansion. But don't take my word for it. Recently the US Treasury conveniently wrote a paper admitting that the Fed was responsible for spurring the asset inflation. The dollar has lost 97% of its valu…

QE myths:

http://business.time.com/2013/09/18/taper-tantrums-3-myths-a...

Re: TWTR

#238

Post by Symmetry »

icebraining wrote: post #116
pachydermic wrote: post #65

Earlier quoted context omitted.

"Homo economicus" is still really important for macroeconomics. The reason for this is pretty simple: designing rich, large models is still hard to do and the practical limitations introduced by basing your assumptions on the idea that people act irrationally instead of rationally can make things too complicated to be of practical use. So in microeconomics or small models, people can practically accept and implement…

The issue is not just that models are hard. The claim of some economists is that while people behave irrationally, not everyone behaves irrationally all the time, so the issue is self-correcting as long as you have enough liquidity and participants in the market. It's like the law of large numbers; while a single transaction may have a completely wrong price, a sufficiently large number will average the irrationaliti…

Most of the time it's like that, but sometimes you have a situation like nominal loss aversion/sticky wages where humans are very consistent about their irrationality and that irrationality has very important effects.

http://en.wikipedia.org/wiki/Sticky_wages

http://econlog.econlib.org/archives/2013/09/why_dont_wages.h...

Re: TWTR

#239

Post by coob »

corford wrote: post #209
ChuckMcM wrote: post #198

Earlier quoted context omitted.

I think you fundamentally misunderstand the process but that is ok, its not all that straight forward. The transaction here is between risk takers (venture capitalists and investment banks) and risk pricers (people who buy stock). Nobody is getting "ripped off" as long as everyone is following the rules set down by the SEC. Investors put money at risk. You know that because you've been here on HN a couple of years an…

Thanks Chuck for the thoughtful reply. If anything, I think I need to direct my negativity towards the public stocks and shares system as whole (i.e. it just appears to boil down to a numbers and sentiment game that doesn't seem to be a rational way to determine a company's "real" value at any given point in time) rather than looking for cynical players ripping people off. Looking at it another way: the whole thing i…

There is no such thing as 'real' or 'true' value. Looking for it is akin to waiting for Godot.

The only way you can ascribe value is from the point of view any one particular entity (including yourself) at any one particular time. The only way you can see it is when a transaction takes place.

Re: TWTR

#240

Post by 0A0D66 »

phonon wrote: post #225
oijaf888 wrote: post #161

Earlier quoted context omitted.

"breach of fiduciary duty" is a very real thing. (29 USC § 1109 specifically) In this case it has nothing to do with the link you posted. He means the contract that Twitter signed with the banks probably has language that says they will attempt to get the best possible price for the shares. The resulting pop shows that they did not do that.

Isn't 29 USC § 1109 about corporate benefit plans? What does that have to do with general Director breaches of fiduciary duty (which is covered under state level business corporate law...)

Wow, it totally is. It's the Employee Retirement Income Security Act. GP are you just pulling stuff out of your ass?
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