In defense of the IPO, and how to improve it
1–10 of 22 posts
Re: In defense of the IPO, and how to improve it
#2This is a breath of fresh air in comparison to HN's typical ignorance on IPOs. I can see why it wouldn't be popular here.
A mix of the theoretical grounding of the activity with the on-the-ground realities of filling up a book and mechanics of how it happens. The IPO isn't perfect, and is in need of a software-defined overhaul, but does have clear value. We'll see if Carta's Xchange product can live up those goals.
Re: In defense of the IPO, and how to improve it
#3Interesting points they are making, it would be interesting to see how much of the IPO volume gets sold out in the first week or month to see how much of the price is being driven by just a few shares.
I looked at Zoom's IPO, the trade volume on IPO day was around 26M with closing price of 62. If for simplicity we disregard the same shares being traded(trading strategies, HFT trades). This is about $1.5 B in volume, they raised $0.36 B in IPO. So, the point that the article makes about the value being driven by just a small set of "gamblers" and not the value of the whole/majority of IPO block probably needs to be looked at with data.
Is there any way to determine the big institutional trades on a particular day to see if any of the IPO subscribers ended up selling in the first few days of listing?
Re: In defense of the IPO, and how to improve it
#4Excellent article - goes into some detail on the myth of oversubscription (well, inflation of reality)
Re: In defense of the IPO, and how to improve it
#5Excellent breakdown with the proper theory. However
> In an institutional fundraise, all buyers must get the same price
Isn't that the basic problem? Don't we have tons of auction theory on how to not sell all at the same price? presumably that auction theory also properly doesn't confused the varying unit price vs total money raised (it's integral).
Re: In defense of the IPO, and how to improve it
#6I've read countless articles on IPOs. This is the first time I appreciated the mechanics and economics. Excellent article.
Re: In defense of the IPO, and how to improve it
#7This is a breath of fresh air in comparison to HN's typical ignorance on IPOs. I can see why it wouldn't be popular here. A mix of the theoretical grounding of the activity with the on-the-ground realities of filling up a book and mechanics of how it happens. The IPO isn't perfect, and is in need of a software-defined overhaul, but does have clear value. We'll see if Carta's Xchange product can live up those goals.
Please don't sneer at others in HN comments, including putting down the rest of the community. Believe me, I understand how annoying widespread ignorance can be, but the only thing that has a chance at helping is patient explanation. Adding more poison only makes things worse.
If you know more, the thing to do is to share some of what you know, so the rest of us can learn. You've done this in previous comments, which is great.
Re: In defense of the IPO, and how to improve it
#8This is a breath of fresh air in comparison to HN's typical ignorance on IPOs. I can see why it wouldn't be popular here. A mix of the theoretical grounding of the activity with the on-the-ground realities of filling up a book and mechanics of how it happens. The IPO isn't perfect, and is in need of a software-defined overhaul, but does have clear value. We'll see if Carta's Xchange product can live up those goals.
This article is good as long as you realize that it is a very company-centric description, as you would expect from a VC.
Criticisms of IPOs on HN fall into two buckets, first whether the companies are giving up too much equity and second whether access to IPOs is fair and serves the public interest. This article mostly addresses the former, and really only briefly touches on the latter.
Re: In defense of the IPO, and how to improve it
#9Excellent breakdown with the proper theory. However > In an institutional fundraise, all buyers must get the same price Isn't that the basic problem? Don't we have tons of auction theory on how to not sell all at the same price? presumably that auction theory also properly doesn't confused the varying unit price vs total money raised (it's integral).
Seems very strange to leave out any discussion of auction models for pricing, like Google and Spotify used.
Re: In defense of the IPO, and how to improve it
#10The counter argument in favor of direct listing: https://podcasts.apple.com/us/podcast/invest-like-the-best/i...
I’m not sure anyone is arguing SPACs are a better idea for the private company?
SPACs can offer some certainty in what may be an uncertain market, but their entire point is that the SPAC creator is selling this certainty by finding an undervalued company they can take over on the cheap. I think a SPAC is a really bad way to go public unless you’re someone like Nikola where your company is basically a fraud ripping off the SPAC, in that case probably a good way to go for the founder.
I’m still skeptical of the a16z arguments defending the IPO pop. When you have banks doing lots of transactions and founders doing only one or two the transactions will likely be skewed to benefit the banks along with a really compelling narrative of why they’re not.
The simpler answer seems more likely here, I think Matt Levine is probably more correct.
https://www.bloomberg.com/opinion/articles/2020-08-06/it-s-a...