And Now Facebook's Bankers Are Divvying Up The $100 Million They Made Shorting FB
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The "over-allotment option" has been a standard mechanism used in IPOs for as long as anyone can remember. To the extent that it does help underwriters stabilize the price of an IPO, there's nothing sinister about it, and its existence is clearly disclosed.
But the fact that Facebook's underwriters made an extra $100 million on the Facebook IPO from shorting Facebook's stock--while the clients who bought the stock lost their shirts--is just yet another example of the heads-we-win, tails-you-lose structure of Wall Street.
Theres nothing sinister about it and its clearly disclosed, but the instant theyre making money on it, they are pure evil. Dont want it? maybe, just maybe, dont put it in the contract. say "NO!" to the price stabilization mechanism. then complain when your investors tear you new assholes in court. instead of not complaining just that one time about that, tell em its the bankers fault.
Maybe the reason bankers have so much power isnt that they are the lowest of the low but that they can act like quasi-agencies with government mandated INVESTMENT BANK labels of which only half a dozen exist.
But the fact that Facebook's underwriters made an extra $100 million on the Facebook IPO from shorting Facebook's stock--while the clients who bought the stock lost their shirts--is just yet another example of the heads-we-win, tails-you-lose structure of Wall Street.
Theres nothing sinister about it and its clearly disclosed, but the instant theyre making money on it, they are pure evil. Dont want it? maybe, just maybe, dont put it in the contract. say "NO!" to the price stabilization mechanism. then complain when your investors tear you new assholes in court. instead of not complaining just that one time about that, tell em its the bankers fault.
Maybe the reason bankers have so much power isnt that they are the lowest of the low but that they can act like quasi-agencies with government mandated INVESTMENT BANK labels of which only half a dozen exist.
Please never forget that BusinessInsider was founded by a man, Henry Blodget, who is barred from the securities industry for being a felonious scumbag.
And here Blodget is playing on idiot populist sympathies, ie. Mr Woo's: Bankers are out and out CRIMINALS, as are politicians.
HANG THEM ALL.
to generate maximum CPM for himself with nonsense stories like this.
The "green shoe" is essentially a function that helps facilitate the IPO process, theoretically in place to help the public.
Dealers are allowed to over sell inventory to meet high demand at IPO time, that means the public was getting their shares at $38 when the initial allotment of shares ran out - no green shoe would have meant that the stock would have shot up (to the low 40s, I guess); this would have made some IPO participants ecstatic at the expense of many who would get shut out owning at $38.
A Monday morning quarterback will call letting more people participate in an IPO unfair only when the stock goes down.
It's part of the process and an expert desk will play it right to make money when the opportunity presents itself (or mitigate loss, obviously), but a big shoe can, and sometimes does, crush a desk's P/L.
Sometimes the stock does not come back in and the desk has to eat a big loss on a short position (it's not like the desk says, "hey let's short this thing because we know the future!") - happens all the time, it's called "risk".
It well may have been that some sharps at MS said "hey, all of these people and our own people, are fucking retarded. Big green shoe!" This would have been a decision made by the lead syndicate desk and probably discussed with the whole selling group (all the selling partner desks informed) and in full disclosure with MS brass, especially in a monster IPO like this one.
So Blodget is essentially dressing some perfectly normal results of this IPO with a catchy headline for dumbass monkeys that swing from headline to headline to validate their views.
And here Blodget is playing on idiot populist sympathies, ie. Mr Woo's: Bankers are out and out CRIMINALS, as are politicians.
HANG THEM ALL.
to generate maximum CPM for himself with nonsense stories like this.
The "green shoe" is essentially a function that helps facilitate the IPO process, theoretically in place to help the public.
Dealers are allowed to over sell inventory to meet high demand at IPO time, that means the public was getting their shares at $38 when the initial allotment of shares ran out - no green shoe would have meant that the stock would have shot up (to the low 40s, I guess); this would have made some IPO participants ecstatic at the expense of many who would get shut out owning at $38.
A Monday morning quarterback will call letting more people participate in an IPO unfair only when the stock goes down.
It's part of the process and an expert desk will play it right to make money when the opportunity presents itself (or mitigate loss, obviously), but a big shoe can, and sometimes does, crush a desk's P/L.
Sometimes the stock does not come back in and the desk has to eat a big loss on a short position (it's not like the desk says, "hey let's short this thing because we know the future!") - happens all the time, it's called "risk".
It well may have been that some sharps at MS said "hey, all of these people and our own people, are fucking retarded. Big green shoe!" This would have been a decision made by the lead syndicate desk and probably discussed with the whole selling group (all the selling partner desks informed) and in full disclosure with MS brass, especially in a monster IPO like this one.
So Blodget is essentially dressing some perfectly normal results of this IPO with a catchy headline for dumbass monkeys that swing from headline to headline to validate their views.