[Bartweiss]

It's not just "aren't IPO-ing" - the rapid sale described is often banned today under agreements where shares can't be offloaded for a certain period after the IPO, so that the banks backing the offering can make their money.

[greglindahl]

This lockup normally affects everyone who had shares pre-IPO -- investors, founders, and employees -- when did it not exist? It played a large role in making people sad when the Internet Bubble burst, for example.

[ryandrake]

That's pretty crappy. Another way to prevent anyone but the founders and investors from capturing any value from the IPO.

Instead of selling your shares right after the IPO, couldn't you trade options on those shares in a way that closely simulates selling the underlying equity, and stay within the agreement?

[Bartweiss]

It's definitely crappy. I'm not sure what rules the founders operate under, but it's definitely something investors and underwriters push. Nominally it's to control liquidity, and it does do that, but it does so specifically by handing all early returns to a few of the shareholders. It's not hard to imagine other systems that would, with a bit more work, manage liquidity while letting everyone access the market.

On the options - I'm honestly not sure. I don't think it's barred by contract (since that's about managing actually control and share movement), but I don't know what options trading looks like for newly-IPO'd stocks.

[URSpider94]

In a word, no.

https://blog.wealthfront.com/hedging-stock/

[ryandrake]

Bummer. Startup equity indeed looks like a sucker's bet.