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by jrp 5488 days ago
If the article is correct (future really bad, tricked public going to invest on day 1), wouldn't it make sense to invest and sell very soon?

Is something special about an IPO where you have to hold it for some time?

2 comments

That's a great idea and a lot of people are going to do exactly that. However, think about this: It's a bubble, it will pop, but we don't know when it will pop.

Imagine you want to invest a million dollars and sell when you have doubled your investment. The sooner and cheaper you can buy the stock, the greater your chance to double your million dollars. The longer you wait, the higher the chance that you will be one of the suckers whose investment makes other people rich.

The safest strategy is to buy at the offering price and sell as soon as the stock reaches your target for selling (double in our example). You pay the least and get out the soonest, before the collapse. With every passing minute, the price of the stock rises but the probability of the bubble popping before it reaches your target also rises.

So how do you buy at the offering price? By having a cosy relationship with the investment bank leading the issue, that's how. Do you have a cosy relationship with the investment bank leading the issue? If not, you are playing a game rigged to make other people rich at your expense.

Of course, if you like the fundamentals and plan to buy and hold, that's a different matter. But if you're playing the speculation game, you ought to know that the casino is rigged and that you are not in the business, you are the business.

So what you're saying is it's a game of chicken?
It's a game of Jenga with gold pieces. If you get a piece out, you win your piece. If the tower collapses, everyone still playing loses their money.

And as you can see, the insiders, VCs, and their customers get to play first and leave the game before you get a chance to pull a piece out.

UPDATE: Man, I'm pessimistic today! Don't forget the converse side of the coin: The game may be rigged, but still you might have a good bet to make!

Wow, this is the first time since early 2000 I've seen the "greater fool theory" espoused without irony. Maybe it really is a bubble, now.