Stocks and Trading Thread - Channeling your inner Mono

[Monoriu]

Lot of big IPOs coming out this year.  Starting with Lyft today.  Uber, Airbnb.

Anyone piling in?

Nah.  The only one I am interested in is Saudi Aramco. 

Now that I think about it, I don't even think I have a way to participate in a US IPO.  I seriously doubt if my bank will allow me to subscribe. 

[Admiral Yi]

Now that I think about it, I don't even think I have a way to participate in a US IPO.  I seriously doubt if my bank will allow me to subscribe.

I don't either.  I'm talking about getting in post issue.

[Monoriu]

Now that I think about it, I don't even think I have a way to participate in a US IPO.  I seriously doubt if my bank will allow me to subscribe.

I don't either.  I'm talking about getting in post issue.

Really?  I have no idea how it works in the US.  But in Hong Kong, it is very common for ordinary folk to participate in an IPO.  They distribute forms in banks.  You line up, get one, fill in the form, and return it to the bank.  Then it depends.  If the IPO is under-subscribed, you get all the shares that you asked for.  If the IPO is over-subscribed, the underwriter decides what to do.  Most common method is to draw lots to determine who gets the right to buy the shares.  Some of the gigantic IPOs, e.g. state-owned mainland banks, have a policy of ensuring that everybody gets one lot (in HK, shares are traded in lots.  You have to buy 1000 shares of Company A, or you trade at a disadvantage). 

[Admiral Yi]

Really?  I have no idea how it works in the US.  But in Hong Kong, it is very common for ordinary folk to participate in an IPO.  They distribute forms in banks.  You line up, get one, fill in the form, and return it to the bank.  Then it depends.  If the IPO is under-subscribed, you get all the shares that you asked for.  If the IPO is over-subscribed, the underwriter decides what to do.  Most common method is to draw lots to determine who gets the right to buy the shares.  Some of the gigantic IPOs, e.g. state-owned mainland banks, have a policy of ensuring that everybody gets one lot (in HK, shares are traded in lots.  You have to buy 1000 shares of Company A, or you trade at a disadvantage).

Well, I've heard it said many times that new shares get reserved for "valued clients" by brokerages.  The conventional wisdom is IPOs are a way for fat cat investors to get fatter.  And I've never read or heard anything to debunk that conventional wisdom.

I just did a quick spot check on IPOs on Etrade, and they say you need to fill out a form and get approval first.  Then you can put a conditional offer in if you have cash in your account.  I'm not going to bother.

[Monoriu]

Well, I've heard it said many times that new shares get reserved for "valued clients" by brokerages.  The conventional wisdom is IPOs are a way for fat cat investors to get fatter.  And I've never read or heard anything to debunk that conventional wisdom.

I just did a quick spot check on IPOs on Etrade, and they say you need to fill out a form and get approval first.  Then you can put a conditional offer in if you have cash in your account.  I'm not going to bother.

The valued clients part is true here as well, particularly for small companies.  I don't bother with those.  But some of the IPOs are state-owned enterprises.  They exist not only to make a profit, but to ensure perpetual communist rule.  So they have an incentive to make sure that the little folks all own a tiny amount of the state-owned enterprises, and they make some profit in the deal.  It is almost like a government handout, so every adult in Hong Kong hands in a form. 

[DGuller]

Regular investors can get in on the IPO sometimes, it just depends on whether the stock is expected to tank after going public.

[Habbaku]

I'm looking forward to options contracts opening on Lyft.

[crazy canuck]

I'm looking forward to options contracts opening on Lyft.

Give the article in the NYTimes a read, most of the upside appears to be taken already by the private investors who are now taking it public.

[Habbaku]

That seems to be very likely to be the case, yes. I don't expect puts to come cheaply, but...

[Admiral Yi]

13% bounce for Lyft out of the gate.

[Habbaku]

The hype is strong.

[Admiral Yi]

And now it's cratering.

Did you ever buy those puts Seppuku, or did they stay hypothetical?

[Habbaku]

The puts were (rather predictably) priced excessively high for the potential return. With a breakeven somewhere around the low-$50s, I didn't feel confident enough buying.

Checking up, current reasonable breakeven is ~$40 mark, and I'm not convinced they'll actually lose 1/3rd their current value.

[Admiral Yi]

Yeah, I've noticed in my cursory investigation of options that the easy money is already priced like easy money.

[Habbaku]

I'd hope so, or the writers are suckers. 

Though there's some money to be had writing calls and puts at easy money levels...