Quick commentary on IPOs past 2 weeks. Jay "Mr IPO" Ritter, says in best: "I’m glad that the IPO market is back, but it is as inefficient as ever." With just four hand-allocated, non market-priced, underpriced IPOs, approx. $1.9B in unnecessary 1-day wealth transfer. (thread)
Everyone needs to realize this unneeded wealth transfer comes straight out of the pockets of employees, founders, & investors. That "pop" you hear is money going out of your pocket and into the hands of the bank's best brokerage clients. Market pricing & open access solve this.
With these 4 IPOs ($VRM, , , ), the average underpricing cost $483mm per company. For most SV companies, employees own 25% of the company. Underpricing this way robs your own employees of $120mm. This choice of Direct Listing vs IPO matters for all employees.
If your company is considering going public, & you don't want to "give-away" your hard earned equity capital to fund a 1-day "pop" wealth-transfer, tell your CEO/CFO/GC to use a modern approach with (A) market-pricing, & (B) open access. The DL does both. IPO has neither.
I am really surprised we haven't seen a derivative suit with one of these underpriced IPOs brought on behalf of ex-employees. Failure to use market-based pricing approach is arguably malfeasance, as is giving away $400mm+ in a single day. Simply poor corporate governance.
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