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Comment by pseudolus | Hacker News Reader

"Investor groups, however, warned it could diminish their protections as the banks perform due diligence on the companies."

That's positively hilarious in light of some of the dogs that investment banks have knowingly foisted on the public.

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To turn the argument on its head, imagine the dogs that even investment banks would have declined underwriting and that will now have a shot with investors.

Unfortunately the regulation is there to make sure investment decisions can be made fairly and based on factual material. They are not there to tell you if an investment is profitable or not.

Yeah but the marketing material rarely says we always lose money and will likely never turn a profit.

The S-1 is required to say so if this is the case. As are the 10-Ks.

bitconneeeeeeeect!

This should not be downvoted. It can get this bad somewhat quickly.

Now that there will be "competition" from direct listings, will due dilly get more or less stringent?

Or will we just look at traditional listing as higher quality, looking more dubiously at companies that choose direct listing? One might look at SPAC as a similar less vetted avenue some companies are taking right now.

I suspect well known companies with good public reputations will not gain much from going the traditional routes. But lesser known companies will need to go traditional to have that extra level of vetting and get a big brand name behind them.

Fear not citizen! I am protecting you from yourself for the price of a small fee. You should be glad I'm here to rubber stamp your investment decisions!

> small fee

A generous 7%. I would like a small cut of this small fee.

I appreciate your sarcasm, but we all know it isn't just a small fee.

Airbnb lost out on over half the money they could have raised.

edit:

Priced to the banks at $68/share [1], opened to the public at $146/share the next day [2]. Free money for the banks, missed opportunity for the Airbnb balance sheet, and continued shut out of retail investors (even those with a large net worth).

This keeps happening. Snowflake and C3.ai left over 100% on the table to the bankers, and DoorDash left almost as much [3]. Bankers continue to get free money that the companies could use themselves for hiring and other expenses.

[1] https://www.nytimes.com/2020/12/09/business/airbnb-ipo-price...

[2] https://www.barrons.com/articles/airbnb-prices-ipo-at-68-a-s...

[3] https://www.fool.com/investing/2020/12/20/why-i-didnt-go-all...

An IPO pop does not necessarily mean that any money has been left on the table: just because some shares trade at $146 doesn't mean that all of them could have been sold for the same price. The demand curves slope downwards.

However, when the pop is as large as it was in the case of Airbnb, it does seem like they could have raised more cash.

This. All to the benefit of the investment bank and their best customers who are rewarded with allocations of “hot” ipo’s.

How I know this: I have been the recipient of allocations in the past.

In return for telling them how much your interested and at what price.

No, they tell you what the price will be at the last moment. They do indicate a range. They don’t really care what you think about the price.

Markets have order books for that kind of thing. In fact, that is what a direct listing is based on.

This is not the same as an underwriting fee, and there is still the possibility that a company underprices their stock offering as well.

First I’ve heard of this - do you have a source handy?

I think OP is alluding to the fact there was a big pop on IPO day (which indicates that the IPO was mispriced). Though that is not a "fee", but money left on the table for the company.

And the pop in Airbnb's case was pretty enormous. They priced at $68 and closed on the first day at $144.71

I continue to be flabbergasted any time these companies don't run an auction. Ideally N auctions, spread out through the day.

Google did. The banks liked to release articles saying it was a disaster but they were pricing it lower than that so overall Google came out ahead.

He’s referring to Goldman most likely deliberately underpricing the stock. During the IPO the investment bank gives access to certain folks: Their clients. They doubled their money almost risk free since they know demand.

> They doubled their money almost risk free since they know demand.

They only did double their money if they can sell without pushing the price down. That's not easy to do for institutional investors.

In fact, institutional investors often make informal agreements to not flip the shares in exchange for their allocations.

Right. That's why I always thought buying IPOs is a bit of a mug's game.

Buying anything volatile is a mug's game. An IPO is infinitely volatile since it has no history.

I didn’t know that was a thing.

That's the investors' version of the passive-aggressive talk: "you're free to do business on your own, but we'd like to remind you of dangers you'll be exposed to without our protection."

Agree! Let's not think leather shoes and shirt cuffs is always better. There's a long running issue with fee-for-service giving what the client wants. Ok to be fair to banks they could easily be value add but only if they face stiffer down side on fees when fraud, bs, and bad evals happen earning indeed commanding those fees on the upside or average case. It's separating risk from reward that is the issue largely.

They were going to drop WeWork/Wewhatever on the Public.

I'm beginning to think that there should be tier's of investor protection that get activated by numbers of complaints or similar metrics. Similar to what we've seen at county-level pandemic restrictions.

Right now all we have are pendulums that swing to overfit against bad behavior, and then swings back the other way because they made it too costly for good actors to participate at all.

The problem with this is it probably would allow the government to pick winners via political favors, which would almost assuredly happen in the present climate if even remotely possible.

I'll elaborate to clear that idea up, the government wouldn't be picking in this model, certain frameworks of investor protections wouldn't apply across the entire industry if certain industry wide thresholds were met.

so instead of only rulemaking and comment periods to change bits and pieces of the protections, there would be the overarching trend to dictate whether it applies or not

Independent financial audits of public companies seem to create the most value.

You mean packaging up trillions of dollars worth of F rated investments into so many layers of garbage financial twiddling that they become A rated investments? Never happened.

letting capitalists do the regulation seems like not much of checks and balances against corporate power.

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