Title: Early bird specials Post by: poly on February 27, 2013, 11:10:00 AM Recently, IPOs are involving early bird specials - shares priced at a discounted price, and then tiered share dumpings at a higher price point. It certainly encourages people to purchase the shares as if there's enough demand it's easy to make a profit selling the early bird shares at a markup, but barely any information is provided, and controversy / discussion of the asset happens much later after the early bird special.
Tiered IPOs are not a new phenomenon from what I can tell - S.DICE followed a similar system, but the announcement of the IPO was in advance and they had an actual prospectus. Compare this with companies selling the first shares at half price or less. Title: Re: Early bird specials Post by: Logik on February 27, 2013, 11:35:03 AM This is sparta
Title: Re: Early bird specials Post by: poly on February 27, 2013, 11:41:04 AM This is sparta Umm, sorry?Title: Re: Early bird specials Post by: Logik on February 27, 2013, 11:45:12 AM Sorry that might have been a little obscure. I was originally going to paste an image but I'm on an ipad and its too hard. It's a meme. Google 'this is sparta'.
I'm saying that you're right and people are being too cavalier with the ipos but they do it because the entire bitcoin world is a bit crazy. Title: Re: Early bird specials Post by: Deprived on February 27, 2013, 04:39:34 PM It happens for two reasons:
1. People are desperate to raise cash - the prospect of buying shares then selling them on at an immediate profit is siffocent grred-based motivation for them to get sales they otherwise wouldn't get. And if sales go slowly they can always buy up a big chunk themselves to make demand look higher than it actually is. 2. The people doing it have no clear idea of what their companies are actually worth - so don't really care about selling at a 'fair' price as they lack the information and ability to actually work out a 'fair' price in the first place. Doing it that way will tend to raise more cash quickly than would otherwise be the case - but will inevitably end up raising less cash in total than a properly planned IPO would if (and only if) the company is actually worth the sort of ball-park valulation that the share shales add up to. If the company is actually worth very little then the early-bird approach will raise more than they'd ever raise through a more traditional approach to their IPO. Which leads to the conclusion that companies doing it either need the cash very fast OR believe the company isn't worth as much as they ask OR are just totally clueless on how to value their company. I think a mix of all three is the case in the recent couple pf such IPOs - with the balance between the three actually quite significantly different between them. Note that S.BBET on MPEx also did a very similar thing (heavily tiered pricing of shares) and seems to have stagnated with no new sales after the first load (probably due to their being no sign at all of it heading towards decent profits). It's a way to lock in profit (or cover debts) for the founders even if the business never really takes off. Title: Re: Early bird specials Post by: MPOE-PR on February 27, 2013, 05:46:50 PM It happens for two reasons: 1. People are desperate to raise cash - the prospect of buying shares then selling them on at an immediate profit is siffocent grred-based motivation for them to get sales they otherwise wouldn't get. And if sales go slowly they can always buy up a big chunk themselves to make demand look higher than it actually is. 2. The people doing it have no clear idea of what their companies are actually worth - so don't really care about selling at a 'fair' price as they lack the information and ability to actually work out a 'fair' price in the first place. Doing it that way will tend to raise more cash quickly than would otherwise be the case - but will inevitably end up raising less cash in total than a properly planned IPO would if (and only if) the company is actually worth the sort of ball-park valulation that the share shales add up to. If the company is actually worth very little then the early-bird approach will raise more than they'd ever raise through a more traditional approach to their IPO. Which leads to the conclusion that companies doing it either need the cash very fast OR believe the company isn't worth as much as they ask OR are just totally clueless on how to value their company. I think a mix of all three is the case in the recent couple pf such IPOs - with the balance between the three actually quite significantly different between them. Note that S.BBET on MPEx also did a very similar thing (heavily tiered pricing of shares) and seems to have stagnated with no new sales after the first load (probably due to their being no sign at all of it heading towards decent profits). It's a way to lock in profit (or cover debts) for the founders even if the business never really takes off. This is not "recently". This is how IPOs work irl. Title: Re: Early bird specials Post by: Deprived on February 27, 2013, 05:54:06 PM It happens for two reasons: 1. People are desperate to raise cash - the prospect of buying shares then selling them on at an immediate profit is siffocent grred-based motivation for them to get sales they otherwise wouldn't get. And if sales go slowly they can always buy up a big chunk themselves to make demand look higher than it actually is. 2. The people doing it have no clear idea of what their companies are actually worth - so don't really care about selling at a 'fair' price as they lack the information and ability to actually work out a 'fair' price in the first place. Doing it that way will tend to raise more cash quickly than would otherwise be the case - but will inevitably end up raising less cash in total than a properly planned IPO would if (and only if) the company is actually worth the sort of ball-park valulation that the share shales add up to. If the company is actually worth very little then the early-bird approach will raise more than they'd ever raise through a more traditional approach to their IPO. Which leads to the conclusion that companies doing it either need the cash very fast OR believe the company isn't worth as much as they ask OR are just totally clueless on how to value their company. I think a mix of all three is the case in the recent couple pf such IPOs - with the balance between the three actually quite significantly different between them. Note that S.BBET on MPEx also did a very similar thing (heavily tiered pricing of shares) and seems to have stagnated with no new sales after the first load (probably due to their being no sign at all of it heading towards decent profits). It's a way to lock in profit (or cover debts) for the founders even if the business never really takes off. This is not "recently". This is how IPOs work irl. Selling a bunch of shares at price X then selling another bunch at price 2*X a few days later is NOT how things work irl. Discounting for early/bulk orders/placements is entirely normal - it's the extent/time-scale over which it's happening that is a fairly recent development. Plus the fact the heavily discounted (if they are actually discounted - without any financials it could be a smaller markup rather than a discount at all) ones are being sold to Joe Public is rather different to irl. Title: Re: Early bird specials Post by: matauc12 on February 27, 2013, 06:47:10 PM I SAY early birds should pay more!
But seriously, buying shares for more (or less) than IPO is entirely in the investors power. If it results in higher resale value, its down to the buyer to decide if its worth it. If the second wave is more expensive, no one is forcing to buy. It is 100% driven by supply and demand. Who are you to argue agisnt the most basic and well established economic fact? Title: Re: Early bird specials Post by: Peter Lambert on February 28, 2013, 04:29:42 AM While we are complaining about shady business tactics, how about the "shares held by the company for growth and maintenance" which seems rather odd to me. Why state "100% profits go to dividends" when part of those dividends just go back to the company? The usual way of doing things would be to report a retained earnings of the company as x% of the profit, and the other (100-x)% get dispersed to the shares as dividends, any shares held by the company do not receive dividends. (this is being done by Bakewell, and the two new listings Zipgap and BitcoinPride, on BitFunder)
Title: Re: Early bird specials Post by: poly on February 28, 2013, 05:23:48 AM It happens for two reasons: 1. People are desperate to raise cash - the prospect of buying shares then selling them on at an immediate profit is siffocent grred-based motivation for them to get sales they otherwise wouldn't get. And if sales go slowly they can always buy up a big chunk themselves to make demand look higher than it actually is. 2. The people doing it have no clear idea of what their companies are actually worth - so don't really care about selling at a 'fair' price as they lack the information and ability to actually work out a 'fair' price in the first place. Doing it that way will tend to raise more cash quickly than would otherwise be the case - but will inevitably end up raising less cash in total than a properly planned IPO would if (and only if) the company is actually worth the sort of ball-park valulation that the share shales add up to. If the company is actually worth very little then the early-bird approach will raise more than they'd ever raise through a more traditional approach to their IPO. Which leads to the conclusion that companies doing it either need the cash very fast OR believe the company isn't worth as much as they ask OR are just totally clueless on how to value their company. I think a mix of all three is the case in the recent couple pf such IPOs - with the balance between the three actually quite significantly different between them. Note that S.BBET on MPEx also did a very similar thing (heavily tiered pricing of shares) and seems to have stagnated with no new sales after the first load (probably due to their being no sign at all of it heading towards decent profits). It's a way to lock in profit (or cover debts) for the founders even if the business never really takes off. This is not "recently". This is how IPOs work irl. Title: Re: Early bird specials Post by: Deprived on February 28, 2013, 05:32:26 AM While we are complaining about shady business tactics, how about the "shares held by the company for growth and maintenance" which seems rather odd to me. Why state "100% profits go to dividends" when part of those dividends just go back to the company? The usual way of doing things would be to report a retained earnings of the company as x% of the profit, and the other (100-x)% get dispersed to the shares as dividends, any shares held by the company do not receive dividends. (this is being done by Bakewell, and the two new listings Zipgap and BitcoinPride, on BitFunder) Yeah that's a pretty abhorrent practice that serves no useful purpose. It just adds unnecessary complexity and confusion - es[ecially when shares have voting rights (NOT the case on Zig/Pride). Some BTC companies will go to any lengths to avoid having to do any sort of proper accounts. There's not even any meaningful definition of what profit IS in the two listings you mentioned. Both will hold significant amounts of both USD and BTC - so there should really be a definition of what profit actually is. If the exchange rate changes in either direction does any resultant change in the value of assets (in whichever currency they account in) mean that a profit/loss was made? If not, then how are accounts being done to exclude such impact? Value change arising from exchange-rate movement has to either be included or excluded when calculating profit : we don't even know WHETHER it's included let alone the detail of how accounting will be done. The contracts are silent on a bunch of things that should be in there: but that's BTC world for you. Contracts written by the financially illiterate. On the bright side at least they're actually genuine companies with actual product and a non-zero chance of success - a massive step up from the blatant scams/deceptions listed on Bitfunder recently: Biz27B - where the scammer hasn't even bothered saying what his business is and instead pretends it's listed to track invetsment of private shareholders when it's obviously an attempt to sell unspecified crap to the public. There MAY be some business behind it but it's inherently a fraud when he claims a purpose for listing which is obviously a lie (he claims he can't stop shareholders selling to the public - but is actually the one trying to do it himself). If his plan is so shit he can't even reveal WHAT it is then he should have the decency not to list - OR the exchange should have the self-respect to tell him to fuck off. As he hasn't revealed what the business (supposedly) is, it's hard to be SURE it's a scam. But if it isn't, it's almost certainly some worthless junk - as not revealing the nature of a succeessful business would just be giving away too much value to be done by anyone rational. It does give him the chance to drop hints etc and try to fool people into believing he's a business that he isn't (without actually ever making a claim) - which is the best chance he has of making this particular scam pay off (and on at least one level it absolutely IS a scam as there's demonstrable lies in the limited information he's provided - meaning he's trying to obtain money under false pretences). Exchange.ESIF - think of anything which makes it obvious something is just an outright scam and this one has it. In trumps. So although there's lack of detail/disclosure in the new two they ARE a big step in the right direction and, also in their favour, they aren't mining companies, investment funds or gambling sites. Title: Re: Early bird specials Post by: matauc12 on February 28, 2013, 05:53:22 AM While we are complaining about shady business tactics, how about the "shares held by the company for growth and maintenance" which seems rather odd to me. Why state "100% profits go to dividends" when part of those dividends just go back to the company? The usual way of doing things would be to report a retained earnings of the company as x% of the profit, and the other (100-x)% get dispersed to the shares as dividends, any shares held by the company do not receive dividends. (this is being done by Bakewell, and the two new listings Zipgap and BitcoinPride, on BitFunder) Start up companies generally need a savings fund for short-mid term that are not immediate expense. So they would just be "fixed percent expenses" that are not yet spent (so in some way somewhat arbitrary). So the end result is the same on the "negative side". But in your scenario, the issuer has full control on that, thus can also manipulate share value at will.You are trying to re-invent the wheel with a square concept. You are almost implying the company shouldn't get dividends... The way shares work is well established in every economy. Stop blaming basic economic facts and methods and blame investors that make bad investments. If everyone cries that an IPO is bad, I'll blame the idiots who bought the shares much more than the retard who wrote the IPO. Title: Re: Early bird specials Post by: Peter Lambert on February 28, 2013, 03:38:59 PM While we are complaining about shady business tactics, how about the "shares held by the company for growth and maintenance" which seems rather odd to me. Why state "100% profits go to dividends" when part of those dividends just go back to the company? The usual way of doing things would be to report a retained earnings of the company as x% of the profit, and the other (100-x)% get dispersed to the shares as dividends, any shares held by the company do not receive dividends. (this is being done by Bakewell, and the two new listings Zipgap and BitcoinPride, on BitFunder) Start up companies generally need a savings fund for short-mid term that are not immediate expense. So they would just be "fixed percent expenses" that are not yet spent (so in some way somewhat arbitrary). So the end result is the same on the "negative side". But in your scenario, the issuer has full control on that, thus can also manipulate share value at will.You are trying to re-invent the wheel with a square concept. You are almost implying the company shouldn't get dividends... The way shares work is well established in every economy. Stop blaming basic economic facts and methods and blame investors that make bad investments. If everyone cries that an IPO is bad, I'll blame the idiots who bought the shares much more than the retard who wrote the IPO. Was that response pointed at me? Right, I am saying the company should not be giving dividends to themself. They should not have "100% profit" shares. They should have shares of the company, and periodically they should do their accounting, calculate a profit number, retain some percent of that profit for growth, and distribute the rest of the profit among the shares. Why is that so difficult to understand? Title: Re: Early bird specials Post by: MPOE-PR on February 28, 2013, 05:12:30 PM Selling a bunch of shares at price X then selling another bunch at price 2*X a few days later is NOT how things work irl. It's exactly it. Underwriter banks acquire the entire offering at a discount, then push it to their customers at less of a discount and finally let it out on the market at the agreed upon price or over that. Discounting for early/bulk orders/placements is entirely normal This is a. not what's happening here and b. not normal. The discount is for the underwriting of risk, not for "bulk". This isn't like buying a lot of pork carcasses. This is like buying paper, that may be very valuable or not valuable at all. Plus the fact the heavily discounted (if they are actually discounted - without any financials it could be a smaller markup rather than a discount at all) ones are being sold to Joe Public is rather different to irl. MPEx does not sell to Joe Public. MPEx is usually being accused of centralizing the market, the effort of keeping the underwriter business open for the general interest should merit some applause rather than some censure. While we are complaining about shady business tactics, how about the "shares held by the company for growth and maintenance" which seems rather odd to me. Why state "100% profits go to dividends" when part of those dividends just go back to the company? The usual way of doing things would be to report a retained earnings of the company as x% of the profit, and the other (100-x)% get dispersed to the shares as dividends, any shares held by the company do not receive dividends. (this is being done by Bakewell, and the two new listings Zipgap and BitcoinPride, on BitFunder) This is a point. More of the herpderp GLBSE financing. There's no such thing as "growth shares", it's the wrong way to represent dividend retainment by the corp. |