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Home / Business / It does not matter that the peloton stocks fell on the first day: Morning Brief

It does not matter that the peloton stocks fell on the first day: Morning Brief



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6"> Get the Morning Brief delivered to your inbox by 6:30 AM ET Monday through Friday. Subscribe

Why the IPO of Peloton was a great success

Peloton went public on Thursday.

Equivalent exercise platform operator listed at $ 29 on Wednesday and closed the trading session on Thursday at $ 25.76. Good for a $ 11.2% drop on the first trading day.

This drop in the stock on the first day of trading could be considered a disappointment. For example, Bloomberg notes that this was the third worst public debut in the last decade.

This price movement may indicate that investors are unenthusiastic about Peloton's outlook and that the bouts of consumer technology IPOs will continue this year. Some may also ask if this means the IPO window will be closed. Did the fights at The We Company extend to other offerings? And if stocks burst on the entire market of a successful IPO on the first day, then surely this is a failure, right?

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) –sm Mt (0.8em) – sm" type = "text" content = "Well, according to the famous VC Investors Bill Gurley IPO-Pop on the first day is the most misunderstood and financially nonsensical event that could be decided by a management and investor team and the media team. "Data-reactid =" 22 "> Well, according to the famous VC investor Bill Gurley the IPO on the first day is the most misunderstood and financially nonsensical event that a management and investors as well as the media team could become root for.

<p class = "canvas-atom canvas-text MB (1.0em) MB (0) – sm Mt (0.8em) – sm" type = "text" content = "Speaking With Patrick O & # 39 "Shaugnessy on the Invest Like the Best podcast this week, Gurley grappled with the idea that" successful "IPOs are those in which the stock of a company trades significantly higher on the first trading day." Data-reactid = "23"> Talking to Patrick O & # 39; Shaugnessy About Invest As the best podcast of this week, Gurley has challenged the idea that "successful" IPOs are the ones involving a company's stock higher traded higher on the first trading day.

"Believing that pop is a marketing event is the shortest decision a manager or CEO / CFO could make," Gurley said. "Because it happens and it's over, and then the rest of your business life is based on the company's performance, and the idea that I would gain a lasting advantage by paying $ 500 million for this marketing event is long-term Development inevitable. " Think. "

<p class =" canvas atom canvas text mb (1.0em) mb (0) – sm mt (0.8em) – sm "type =" text "content =" Gurley cited an analogy about buying a home he by Henry Blodget – Imagine selling your house and then hear how your realtors sold the house the next day by 80% more. It is a festival that does not make economic sense. "data-reactid =" 25 "> Gurley cites an analogy to buying a home that he heard from Henry Blodget – imagine selling your house and then listening to your broker house Sold the next day for 80% more. Now imagine that you are celebrating. This is what happens when IPO Pops are cheered on Day 1. It's a celebration that makes no economic sense.

Company Those who see stocks bursting on the first trading day leave money on the table – money that could have been used to invest in the business – and the founders, employees and early investors of a company that sells shares to the IPO also lose Money – possibly hundreds of millions of dollars – if the stock goes crazy on the first trading day The only stakeholders who are looking forward to an IPO on the first day are the lucky ones the day before the stock market ng to get an allotment, and the bankers who can now earn fees for a future second offer of shares

To take a real example from this year, anyone who sold Beyond Meat (BYND) shares to the IPO sold Shares at 25 USD. When the market closed on the first trading day of Beyond, these stocks were worth $ 65.75. For example, a Beyond Meat executive who sold $ 1 million worth of Beyond Meat shares lost more than $ 1.6 million in potential profits.

But guess who has benefited? The investors who received an IPO allotment from Beyond and tilted on the first day, and the bankers who were allowed to participate in the Beyond secondary offering at the end of July.

In other words, the winner of the Beyond Meat IPO was not Beyond Meat. [19659019] Well, surely the bankers who run IPO processes are doing nothing. You can not have your business marketed by well-paid, well-connected finance professionals and connect with investors for free. And as with many things in the financial markets, the psychology of events can be just as important as the economic viability of an event. So, if the psychology of an IPO falling on the first trading day suggests that the company's prospects are bad, the economic benefits to a company that listens to its IPO for a higher price than it is open to trading from possibly ignored by investors.

Gurley's solution for enterprises is to favor direct listings. In a direct listing – seen recently by Spotify (SPOT) and Slack (WORK) – companies do not rely on a team of bankers to gather support for stocks at a given price.

Instead, the company says it will record shares on a given stock exchange on a specific date and then begins trading stocks. The corporation does not borrow money and does not issue new shares. The problem with direct listings, of course, is that they bring much less money to bankers.

The goal of an IPO, however, is not to enrich the bankers or to increase the trading of shares. The objective of an IPO is to raise money and offer liquidity to early shareholders who are in illiquid positions. The price set by the stock market after they start trading does not, or does not, have to do with the company.

After all, a good company will be respected by the market over the long term. As Gurley reminds the audience, Facebook (FB), Amazon (AMZN) and Alphabet (togetL) "broke" and traded at their IPO price. And I think we all agree that these companies have performed well by their shareholders.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = " By Myles Udland Reporter and co-host of The Final Round Follow him @MylesUdland "data-reactid =" 59 "> From Myles Udland Reporter and co-host of The Final Round . Follow him @MylesUdland

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ZHOUSHAN, CHINA – SEPTEMBER 1: Aerial view of a Cosco France container ship to dock in Zhoushan on September 1, 2019, using tugs in front of Ningbo-Zhoushan Harbor , Zhejiang province in China. Singapore-based container ship Cosco France unloads 8,015 TEU containers in Ningbo-Zhoushan harbor. (Photo by Yao Feng / VCG about Getty Images)

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