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Comment by harryh | Hacker News Reader

Not with a direct listing.

Coinbase shares would be subject to an auction and the market for them will open at the price where supply meets demand.

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Not entirely true - since people had to enter a single point on their demand curve as a price and quantity of shares (instead of their entire demand curve) the market clearing price was artificially low. Hence the price pop on day one. To think about it more in depth - assume I enter a bid of 100 shares at $100. If the market clearing price is $50, I’ll be awarded 100 shares at $50. However, I was willing to buy far more than that at a higher price, so I’d go buy more shares on the open market, driving the price up.

But the point is that everyone with a bid >=$50 got filled.

If I am willing to buy 100 shares at $100, I may be willing to buy 300 shares at $60. So just because my bid got filled doesn't mean I won't be buying more.

If you're willing to buy 300 shares at 60, but only 100 shares at $100 you can enter two bids:

100 shares at $100

200 shares at $60

This will satisfy your demand position.

If the person has only 18000 though (300 at 60) then if they put in 100 at $100, they'll only be able to buy 133 at 60.

I would still enter two bids; it's just a matter of adjusting how many at each level.

No, this is not how it works.

All the shares in the auction are sold at the same price. If the market clears at 60, a person entering the bids I described would buy 300 shares at 60.

I apologize if I misunderstood. Isn't this a direct listing? At what point do retail investors get to participate in an auction?

Retail investors (and any other investors) submit orders before the new security begins to trade. The first thing that happens on open is an auction.

thanks. concise.

You can issue your whole curve as orders, can't you? Something like: buy 50 shares limit $200 on open, buy 50 shares limit $100 on open, buy 100 shares limit $50 on open.

There’s only buy orders in these auctions: buy X shares at Y price.

The limit is the price. With the "at open" I was thinking about direct listings where you'd need some way to prevent your order being filled after the opening auction (and potentially at a different price), but with an IPO that's not an issue at all. So you should definitely be able to just put your whole curve in.

This is complete bullshit, you can enter your entire demand curve into the market with various bids.

No, you’re wrong. You’re not taking a bidders budget into account. If I enter 20 points on my demand curve ans they’re all above the clearing price, I’ll end up being forced to buy the quantities of all my bids. That may totally bust my budget. There are no stop limit orders in these auctions...there’s only a buy order with a quantity and a price.

If you are willing to by 100 shares at $100 or, say, 200 shares at $50 you can enter the following two bids:

100 shares at $100

100 shares at $50

This will satisfy your demand curve.

In a direct listing, the initially listed shares will all transact at the same price (the clearing price).

That’s a contrived example though. Say you put 200 shares at $50. If the clearing price is $50, you’ve won 300 shares at $50 - $15,000 total. What if you only have $10,000? I’m saying it’s difficult to a) allow bidders to enter a demand curve b) respect their budget limitations c) keep it easily understandable for bidders.

Why would you put 200 shares at $50 and 100 shares at $100 if you only had a $10,000 budget? That's misrepresenting your actual demand curve.

Are you saying that an auction of this kind is a bit complicated, and it's possible to make a mistake? I suppose that might be true, but that is a very different assertion from your original position:

"since people had to enter a single point on their demand curve as a price and quantity of shares (instead of their entire demand curve)"

Institutional investors still win the day here, because Coinbase opened a private secondary market for them this week to buy shares ahead of the IPO.

Yeah, good catch

https://decrypt.co/55136/coinbase-to-launch-secondary-market...

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