Wednesday, May 23, 2012

Even more on the ugly side of Facebook's IPO

A nice article about the under-pricing that usually occurs for IPOs (but didn't occur for FB).  With quotes from my dissertation adviser, Jay Ritter, and another excellent finance researcher, Jacqueline Garner (who's a friend of mine).

Kid Dynamite doesn't feel a whole lot of sympathy for people who participated in the offering...
My expectations for a huge first day pop were already tempered, but I kept my order for two reasons:
1) I was curious as to how retail investors would be treated, given the fact that the Syndicate seemed to be upsizing the deal to satisfy more demand  and
2) I was a greedy pig clinging to the hope that I might get some free money shares – allocated IPO shares that would get a nice first day pop. 
 
And here’s why this IPO was successful:  because all of us greedy, ignorant retail investors who were willing to buy Facebook at any price  STILL had every chance to escape with our hides intact.

And finally, it looks like FB may have behaved quite badly - and possibly violated Reg FD (a rule that prevents management from disclosing material information to only a select few investors).  Joshua Brown has the story.