Forum Topics A successful IPO means your stock price falls
Hands
3 years ago

I never would have looked at it from this angle....


"The CEO’s job is to maximize value capture to the company and its shareholders. Once the company is publicly traded, that means increasing the company’s valuation, as reflected in a rising stock price. For this reason, most executives are compensated with stock grants and options to align their actions and reward with investors.


The IPO is different. The IPO is one of the few times when the company sells shares for its own benefit. During this rare and very short event the ideal outcome after the sale is for the stock price to trade even or decline during the first days and weeks of trading. Why? Because this is the strongest indication that the CEO and the company have maximized their value capture in the IPO."


https://medium.com/swlh/a-successful-ipo-means-your-stock-price-goes-down-fd3c1aa53f00


Of course that means that your company will be unpopular for a while. In which case, it's a good time to buy more shares??

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CanadianAussie
3 years ago

Bill Gurley argues this point as well. From memory he's passionately against IPOs. Here's the episode if anyone is interested:

https://podcasts.apple.com/us/podcast/bill-gurley-direct-listing-vs-ipo-invest-like-the-best-ep-144/id1154105909?i=1000451016956


If you sold your house for $1M (IPOd your company) and 2 weeks later someone sold it for $2M (your company was trading for twice as much) you'd have left money on the table and wouldn't be happy. Investment bankers should be trying to find a balance between a high enough IPO price without being so high no one is interested and one that isn't too low. However, at the end of the day the bankers get paid regardless.

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Hands
3 years ago

Cool thanks @CanadianAussie !

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