The lockup period is for existing shares that affect employees, founders, and prior investors. The new shares that are issued and then sold at the IPO offering price are able to be traded immediately and this is where the volume comes from.
In order to be a buyer of an IPO you need to have a tremendous amount of net worth, think 10’s of billions of dollars, you need to have a relationship with a bank, and you need to subscribe to all of the IPOs on the calendars, not just cherry pick the ones that you want.
The entire IPO process is really a very limited market place to a very select few buyers and these are typically very large endowments, mutual funds, and so forth.
In order to assure the company that they have buyers, they promise a return to those buyers in the price popping immediately after the IPO, otherwise the IPO pricing loses it’s allure.
In a Dutch auction, typically new shares aren’t created, and instead existing investors sell shares. This means that the company doesn’t get any of that cash on it’s balance sheets. This is done when the company is profitable, or has enough cash reserves to become profitable in the near future and the investors then want to get all of that pop by offering those shares directly.
Now for investors in a regular IPO, it’s also ok for investors, because while the company gets a bit less cash on its balance sheet, the investors shares are valued immediately on the public market and have the benefit of the pop. With the idea being that they will retain this higher value post the 6 month lock up.
However, you will already have two sets of quarterly results typically in that window in which case Wall Street will continue to evaluate the stock. If you can hit your projections you will be in good shape, however, if there are any misses, as was the case with Snap, all of that exuberance was tied to impossible numbers so the reset can be quite harsh.
And in public markets, that reset is instantaneous, because as soon as the news hits the market cap is immediately affected as shares are then traded on this news.
I think you are overselling how exclusive IPOs are... There are plenty of investors 'only' worth millions, not 10s of billions (??? that's like 100 individuals world wide...), that get offered IPOs by large brokerages as a benefit.
> In a Dutch auction, typically new shares aren’t created, and instead existing investors sell shares. This means that the company doesn’t get any of that cash on it’s balance sheets. This is done when the company is profitable, or has enough cash reserves to become profitable in the near future and the investors then want to get all of that pop by offering those shares directly.
This is wrong. Typically its still the company that sells shares. Infact Dutch auctions vs typical IPO's are orthogonal to who sells shares.
In both case the vast majority of the time its the company selling shares from its float.
I think GP was thinking of direct listing, like Spotify's, in which the company does not issue new shares and instead the stock is listed on a market and insiders put up their own sell orders to provide initial volume to the market. In this case, there is no lockup and founders, employees, and other insiders can get immediate liquidity.
In order to be a buyer of an IPO you need to have a tremendous amount of net worth, think 10’s of billions of dollars, you need to have a relationship with a bank, and you need to subscribe to all of the IPOs on the calendars, not just cherry pick the ones that you want.
The entire IPO process is really a very limited market place to a very select few buyers and these are typically very large endowments, mutual funds, and so forth.
In order to assure the company that they have buyers, they promise a return to those buyers in the price popping immediately after the IPO, otherwise the IPO pricing loses it’s allure.
In a Dutch auction, typically new shares aren’t created, and instead existing investors sell shares. This means that the company doesn’t get any of that cash on it’s balance sheets. This is done when the company is profitable, or has enough cash reserves to become profitable in the near future and the investors then want to get all of that pop by offering those shares directly.
Now for investors in a regular IPO, it’s also ok for investors, because while the company gets a bit less cash on its balance sheet, the investors shares are valued immediately on the public market and have the benefit of the pop. With the idea being that they will retain this higher value post the 6 month lock up.
However, you will already have two sets of quarterly results typically in that window in which case Wall Street will continue to evaluate the stock. If you can hit your projections you will be in good shape, however, if there are any misses, as was the case with Snap, all of that exuberance was tied to impossible numbers so the reset can be quite harsh.
And in public markets, that reset is instantaneous, because as soon as the news hits the market cap is immediately affected as shares are then traded on this news.