Comment by mattbrewsbytes | Hacker News Reader

Comment by mattbrewsbytes | Hacker News Reader

An interesting difference between the AI boom and the dot com boom is that back then companies would IPO to raise capital and might have been forced to IPO when they were beyond 500 investors incl employees. These days these companies have already raised capital via private equity and the laws changed which allow them to not count employees with equity and have much higher investor counts. An IPO by either of the frontier labs companies is really a cash-out and payback on the capital they have borrowed. My thinking is the stock price would go down, possibly significantly, after an IPO.

Oracle's credit rating is hovering just above junk bond level. I think the capital agreements are similar to an Adjustable Rate Mortgage and monthly so if there's another rate increase from the Fed and Oracle can't find anyone to buy their bonds and/or their free cash flow continues to be negative then maybe that is a pin-prick in the stock bubble? Its sort of like if you keep bouncing around from 0% credit card offer for 12 months to another and then you stop getting 0% offers, then its time to face the music (those usually have a 3% transaction fee, at least a long time ago they did).

I've been saying for a while now to stay the fuck away from tech IPOs for exactly this reason: it's no longer "we need to raise capital so we can get bigger", it's "we're tapped out on growth, and the last round of private investors needs to be paid back, plus employees need their equity to be worth something in order to stay". Private markets extract all the value and then dump the husk on the public.

The "public" is completely unharmed as long as they stick to broad market index funds. Only the gamblers are harmed.

Assuming the NASDAQ / S&P aren't gamed into listing these at offering price to game the system into putting ~10% of people's retirement into a junk stock on day 1.

"Buy the index" isn't a solution for human influence and corruption, there are people in control of what goes into the index too.

I mean that used to be true until companies began strong-arming the indexes to include them on day 1 instead of having a mandatory 1-year waiting period. Now you're taking the bag whether you like it or not.

When a stock hits the public market, it gets incorporated into broad market index funds (subject to the rules of those funds). If an overvalues stock gets dumped onto the public market, then crashes after being bought by index funds, then holders of those index funds are harmed.

Are there examples of this and quantified losses? The only one I can think of is Nasdaq and SpaceX, but Nasdaq isn’t exactly an index lay people should be investing in, and it isn’t commonly owned anyway (maybe less than 1% own it). And I don’t think SpaceX has lost any Nasdaq 100 investors money yet.

Obviously diluted though by the 499 other stocks in the portfolio (using VFIAX/VOO as an example).

You can get rich by stealing pennies, if you steal them from enough people. It is still wrong, even if no individual lost enough to care about going after you.

If enough people try profiting by stealling pennies, the cumulative losses are significant; and can threaten confidence in and the strenght of the market.

Yeah, the modern landscape uses an IPO not as a fundraiser for growth or expansion.

It's a tool to payback original investors, and insiders using public excitement.

This can be seen very easily in the share of startups that the public gets any exposure to, during their growth phase. This has rapidly declined since those policies changed, and almost all growth is now only exposed to private lending markets. By the time a company IPOs now, it's the exit strategy, not the fuel of another growth multiple on the business.

It's been a funny pairing of DotCom boom investors got burned buying paper with no revenue, and now investors complain about companies staying private till there is profit (or cashflow).

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