A nice article about the under-pricing that usually occurs for IPOs (but didn't occur for FB).  With quotes from my dissertation adviser, Jay Ritter, and another excellent finance researcher, Jacqueline Garner (who's a friend of mine). Kid Dynamite doesn't feel a whole lot of sympathy for people who participated in the offering... My expectations for a huge first day pop were already tempered, but I kept my order for two reasons: 1) I was curious as to how retail...

My colleague, Bart, sent me this screen capture of yahoo finance at 4pm on Friday.   This is what price support looks like.

Felix Salmon talks about the Greenshoe, although he gets it slightly wrong (a rarity for Mr Salmon).  The Greenshoe is the option to sell an extra 15% of the issue, it isn't about shorting the issue.   The SEC allows the underwriters to take a naked short as they are making a market in the new IPO stock.  It is the combination of these two things where the financial magic happens (see my Friday post). From Twitter: Link From Business Insider: "ZUCKERS"

As I said on Friday, Facebook was going to trade below $38 today (Monday), sure enough: This is probably the first, and last time that I will correctly call a stock price movement.

On Friday, Facebook's IPO provided us with a fascinating case study on the effects of price support. Here's the graph of the stock price for the day (note that it didn't start trading right away because of a snafu with Nasdaq's computers). You'll see that the price basically bottomed out at $38, but never went below $38, which is where the price support kicked in. With new buyers of the stock trying to sell, the underwriters posted massive buy limit-orders at $38 (a limit order is an order...

So here is my valuation of Facebook. Based on trailing earnings of $1 billion and an expected market cap of $100 billion we get a trailing PE of 100. As a comparison, Apple's PE is about 13 and Google's is 19. It's really not worth spending much more time on this. Facebook is likely to be crazily overpriced. The next question (as posed to me by my friend Robert) is : "do we short or buy puts?"

A run on Greek banks - people are pulling out Euros. and Spanish bond yields continue to climb.

In case you've been living under a rock, Facebook's IPO is scheduled for Friday.   As Felix Salmon notes, there has been much talk about whether you should buy some of the stock. Let's be clear here.  For individual investors, it will near impossible to buy the IPO at the issue price.  But to buy the IPO at the post issue price (once it begins trading) is a bad idea.   History shows that on average, IPOs purchased on the first trading day significantly underperform similar...

Quite interesting..link

Great short interview with the so-called "father of modern finance". Quote: Active management is a negative sum game.