that isn’t how an IPO works. just because your stock pops doesn’t mean you handed over money to “wall street” if you’ve raised the money you sought at the set IPO price.
the investors who bought the IPO allocation got an immediate 100% return but that is not at the expense of the company.
No one could’ve predicted Airbnb would be bid up to $100B. We are in a massive speculative bubble that not even wall street can make sense of.
you’re giving too much credit to investment bankers if you think they would know a travel company that has $2 billion in debt on their balance sheet, losing money, and in the industry most hurt by covid should’ve obviously been set at $100B when that was no where near where the company thought it was valued.
We’re in a market where Tesla is a $600B company selling 500k a year.
No. Airbnb can sell more shares tomorrow at $150 if they wanted to. OTOH if they gambled and set their price at $150 and the stock tanked it would screw over shareholders who are taxed based on the IPO price and would be underwater immediately.
The IPO is just one transaction in one point in time. They aren’t losing sleep over this.
I guess that's the root of our disagreement; I would give an emphatic Yes to my question above, and I think all our other differences of opinion stem from there.
Decisions are best evaluated in the context in which they were made. If you, after best-effort due-diligence, concluded that a sale for $1 was an okay/good deal, then $1 is great.
It is much easier, in the long run, to be happy for the person who unlocked $499 in value on that baseball card than it is to turn inward and feel awful for the $499 you "missed out on". If you had no idea that such a thing was possible, why feel bad?
I missed out on buying AMZN at IPO prices, as did most of humanity, but I don't feel bad about it. The company could have easily failed. It didn't plan to turn a profit ... ever. AirBnB's price could fall far below the IPO price in the next few months. If so, the IPO-pricing will look like genius in retrospect.
all he said was it makes the stock market look bad when some people double their money in a day.
has nothing to do with whether Airbnb was screwed over by wall street.
no one can predict the public market appetite in this environment. Airbnb was arguably richly valued at $50B as is and is richly valued at $100B. Setting your price too high and then crashing your stock is worse for the company due to tax implications and overall investor sentiment.
> Setting your price too high and then crashing your stock is worse for the company due to tax implications and overall investor sentiment.
Raising double the money is a bad thing due to "investor sentiment"? What tangible negative impact does that have on Airbnb. You're gonna need to explain this one. Because it really sounds to me like repeating a talking point told by a counterparty.
you don’t raise double the money because you set the price 2x unless that was your plan. you would sell half the shares if you had a fixed goal eg $3B.
you decide on how much you need and then decide the number of shares you sell at what price. it isn’t like they would’ve raised twice the money if they upped the share price.
> you don’t raise double the money because you set the price 2x unless that was your plan. you would sell half the shares
You keep throwing out assumptions without anything backing them.
They at a price and amount for sale. Absent an auction set price it's almost certain that price is inefficiently set. And you're arguing that it was efficiently set when we have tens of billions of proof it wasn't efficiently set via yesterday's stock move.
I said nothing about efficiency. All I am arguing is that Airbnb didn’t screw themselves. No money was taken from them. They raised the money they wanted to raise at a price they thought would be tolerable by the public markets.
And handed all the gains on the first day over to the private allotment that was distributed from Wall Street banks to their top clients because no one else could buy shares. It’s total Wall Street bs.
Bill Gurney talking about the inefficiency of the ipo process on Wall Street and the inherent conflict of broker-client problem the banks carry with them.
They handed over boatloads of money because that is the toll that Wall Street firms exact in illiquid markets and that is how Wall Street firms make money.
I'm not saying that they were screwed over.
> all he said was it makes the stock market look bad when some people double their money in a day.
That is one part of what he says, very misleading. He describes it as an "error" that is due to a flaw in the "way Wall Street is organized" (ie. around capitalizing on IPOs). That's more than just saying the markets "look bad".
No one could’ve predicted Airbnb would be bid up to $100B.
Just because you’re Goldman does not mean you can predict where a share price will go on day 1. we are in a massive speculative cycle that isn’t just impacting Airbnb’s IPO but a lot of tech stocks, many up 1x-10x in a year.
So to try to argue that wall street purposefully set the price too low when $50B is already high given travel hasn’t fully recovered yet is makes no sense.
> Just because you’re Goldman does not mean you can predict where a share price will go on day 1.
The EMH doesn't apply if there wasn't a previous market price. This was an absolutely massive move, and I'm supposed to believe there was no indication of that ahead of time.
You can definitely model supply and demand if you're Goldman - I'm not saying that you can predict market moves, but this wasn't a move from a previous efficient market-determined price.
> $50B is already high given travel hasn’t fully recovered yet is makes no sense.
$50B is not high by definition given the current market pricing.
I don’t really know why you’re so caught up in this.
Airbnb could take advantage of their stock price and issue more shares in a secondary offering tomorrow if they wanted to and “screw” the investors who doubled their money in a day by diluting them. It’s not like this was their one shot of raising money ever again.
There’s really nothing for Airbnb to be mad about.
No one really knows what is tolerated by public markets right now. Tech stocks are in a speculative bubble caused by zero rates and a flood of money from the Fed.
It isn’t as if Airbnb can’t sell more shares at $150 now in a secondary offering if they wanted to. The IPO is just one point in time.
They can raise more more at $150 in a secondary if they wanted to.
The consequence of setting too high and cratering your stock the first day is that employees are taxed based on IPO price. Imagine if you owed taxes at $150 and six months later it was at $70. That would be a nightmare.
And I think you’ve been reading too much Bill Gurley.
the investors who bought the IPO allocation got an immediate 100% return but that is not at the expense of the company.