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by joshjkim
3216 days ago
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per earlier comment, yes, way more volatile because supply/demand will be less managed - as you say, IPO sets price, and this is done when bankers effectively pre-negotiate price and placement amounts with many institutional investors (mutual funds, public pensions, other large alternative asset managers etc.) - this is happening throughout informally (though very informally, since they can't offer the security until SEC registration is complete), but really gets down to details during the IPO roadshow, where the final deal is present and the bankers finalize the allocations to various institutional investors, which is what they use to set the opening day of trading price. IPOs also require lockups of pre-IPO investors, and the ideal situation is always to have a large number of new well-respected investors take relatively large blocks that they are likely to hold for a long-ish period of time and pre-IPO investors locked up for a at least 6 months, which will introduce some protection against volatility and the stock price going below the IPO price. obviously price can still go haywire, but it's the best a company can hope for in the public market. |
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if you want to dig really deep (like, 284 pages deep), this lays it all out: https://www.wsgr.com/publications/PDFSearch/IPO-guidebook-3....