It does not matter that Peloton shares have fallen on their first day: Brief Brief

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Friday, September 27, 2019

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Receive the Morning Briefing directly in your inbox every Monday to Friday at 6:30 pm Eastern Time. Subscribe"data-reactid =" 16 ">Receive the Morning Briefing directly in your inbox every Monday to Friday at 6:30 pm Eastern Time. Subscribe

Why the IPO of Peloton was a huge success

Peloton was released Thursday.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Platform operator actions" interactive exercise & nbsp;priced at $ 29 on Wednesdays& nbsp; and ended Thursday's trading session at $ 25.76, a decrease of 11.2% on the first day of trading. "Data-reactid =" 19 "> The shares of the interactive exercise platform operator sold at $ 29 on Wednesday and closed the trading session on Thursday at $ 25.76, which represents a decrease of 11 , 2% the first day of trading.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This stock decline on the first day of trading could be considered a disappointment, Bloomberg notes, for example, that it was & nbsp;third worst public performance& nbsp; of the last decade. "data-reactid =" 20 "> This fall in the stock on the first trading day may be described as disappointing, and Bloomberg has noted that the third worst public start of the last decade.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "This price action could indicate that investors are not excited about the prospects of Peloton and the & nbsp;struggles of IPOs of consumer technologies& nbsp; this year will continue. Some may also ask if this means that the IPO window closes. Has The We Company's struggles extended to other offers? And if all the market of a successful IPO sees shares exploding on the first day, then that's surely a failure, is not it? "Data-reactid =" 21 "> This price action could indicate that investors are not enthusiastic about Peloton's prospects and that the struggles of IPOs will continue this year. if it means that the IPO window closes, is The We Company's fights spread over other offers? And if all the market of a successful IPO sees pop actions the first day, then it's surely a failure, right?

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Well, to the extent that the famous capital investor -risk & nbsp;Bill Gurley& nbsp; see it, the IPO of the first day is the most misunderstood and financially absurd event that a management team – and investors and media – could seek. "data-reactid =" 22 "> investor Bill Gurley As we can see, the IPO of the first day is the most misunderstood and financially absurd event for which a management team – and investors and the media – could become involved.

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Speak with & nbsp;Patrick O 'Shaugnessy& nbsp; on the & nbsp;Invest like the best podcast this weekGurley put forward the idea that "successful" IPOs are those in which the shares of a company are trading much higher on the first day of trading. "Data-reactid =" 23 "> Patrick O 'Shaugnessy On the Invest Podcast As the best of this week, Gurley defended the idea that "successful" IPOs are those in which the shares of a company are trading significantly higher on the first trading day.

"Thinking that an advertising event is a marketing event is the most short-term decision-making that a manager or a CEO / CFO might think," Gurley said. "Because it happens and it's over, and then the rest of your business life is based on the performance of the company." And the idea that I'm going to do it. would get a lasting profit by paying $ 500 million for this marketing event steals hard in the long run by thinking. "

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Gurley quotes an analogy about the purchase of house that he heard from & nbsp;Henry Blodget – Imagine selling your house and then hear your broker selling the house 80% more the next day. Now, imagine celebrating this. This is what happens when the first day's IPO-pops are applauded. It's a celebration that has no economic meaning. "Data-reactid =" 25 "> Gurley cites an analogy with the house purchase he heard about Henry Blodget – Imagine selling your house and then hear your broker selling the house 80% more the next day. Now, imagine celebrating this. This is what happens when the first day's IPO-pops are applauded. It's a party that has no economic meaning.

Companies that see stocks appear 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 in a company selling IPO shares also lose money – potentially hundreds of millions of dollars – if the stock goes crazy on the first day of trading. The only enthusiastic speakers about a first day IPO are the investors who were lucky enough to get an allocation the day before the IPO and then returned those shares, as well as bankers who will now be able to earn fees on a future secondary offering of shares. .

<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "To take a concrete example of this year, anyone with sold Beyond Meat (BYND) shares in the IPO sold $ 25 shares; when the market closed on the first trading day of Beyond, & nbsp;these shares were worth $ 65.75. For example, a leader of Beyond Meat, for example, who sold $ 1 million worth of Beyond Meat stocks to the IPO, lost more than $ 1.6 million in potential earnings. "Data-reactid =" 27 "> To take a concrete example of this year, anyone who sold Beyond Meat shares (BYND) to the IPO had sold shares at $ 25; On the first trading day of Beyond, these shares were worth $ 65.75, so that one leader of Beyond Meat had sold for $ 1 million. Beyond the meat stock in the IPO, potential gains of more than 1, $ 6 million was lost.

<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "But guess who benefited? an IPO allocation from Beyond and reversed the first day and the bankers who had to participate in & nbsp;Secondary offer beyond end of July. "data-reactid =" 48 "> But guess who benefited? Investors who got an allowance from Beyond as part of an IPO have reversed it on the first day and the bankers who were able to participate at the secondary offer of Beyond at the end of July.

In other words, the winner of the Beyond Meat IPO was not Beyond Meat.

True, the bankers who handle the IPO processes do nothing. You can not have well-paid, well-connected finance professionals who market your business and connect for free with investors. And as for many things in the financial markets, the psychology of events can be as important as the economic aspects of an event. So, if the psychology of an IPO that falls on the first day of its operations is supposed to indicate that the company's prospects are bad, then the economic interest for a company that awards its IPO a price higher than the one where he is open to trade could be ignored by investors.

<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Gurley's solution for businesses is to promote lists In a direct list – which we saw from Spotify (SQUARE) and Slack (JOB) recently – companies do not rely on a team of bankers to get support for shares at a certain price. "data-reactid =" 55 "> Gurley's business solution is to focus on direct listings, we've seen Spotify (SPOT) and Slack (WORK) recently – companies do not rely on a team of bankers to get a support for actions at a certain price.

Instead, the company says it will list the stock on a certain stock exchange on a certain date, and then the stock will start trading. The newly created company does not raise money and issues new shares. Of course, the problem with direct registrations is that they allow bankers to make a lot less money.

But the goal of an IPO is not to enrich the bankers nor to make sure that stocks are trading higher. The purpose of an IPO is to raise funds and provide liquidity to the first shareholders sitting in illiquid positions. The price that the market establishes for the shares after the start of their transactions is not – or at least should not and certainly should not matter – imported from the company.

<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Because in the end, a good company will be respected by the long-term market, as Gurley reminds listeners, Facebook (FB), Amazon (AMZN) and Alphabet (GOOGL) "broken product" and traded below the price of their IPO. And I think we would all agree that these companies did well on behalf of their shareholders. "Data-reactid =" 58 "> In the end, a good company will be respected in the long term by the market.As Gurley reminds its listeners, Facebook (FB), Amazon (AMZN) and Alphabet (GOOGL) have" broke the problem "and traded below the price of their IPOs, and I think we all agree that these companies have been successful 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, journalist and co-presenter The final round. Follow him @MylesUdland"data-reactid =" 59 ">By Myles Udland, journalist and co-presenter The final round. Follow him @MylesUdland

What to look for today

Economy

8:30 am EST: personal income, August (0.4% expected, 0.1% in July); Personal expenditure, August (0.3% forecast, 0.6% in July)
8:30 am ET: durable goods orders, preliminary data for August (-1.2% forecast, 2.0% in July); Durable goods excluding transport, forecast for August (0.3% forecast, -0.4% in July);
10:00 ET: University of Michigan Sentiment, finale in September (92,1 expected, 92,0 before)

From Yahoo Finance

Season 4 of the popular NBC drama "This is Us" created on Tuesday. Today at 5 pm ET Yahoo Finance will resume the episode of My Three Cents in which the co-presenter of the Final Round, Jen Rogers, interviews the star of "This is Us" Chrissy Metzwho speaks frankly about her childhood in poverty and how she keeps a close eye on her finances to make sure that she will never live in poverty again.

Read more

Top news

ZHOUSHAN, CHINA - SEPTEMBER 01: Aerial view of a container ship Cosco France moored with the aid of tugs at Ningbo-Zhoushan Port on September 1, 2019 in Zhoushan, Zhejiang Province, China. The Cosco France container ship from Singapore will unload 8,015 twenty-foot equivalent containers (TEUs) at the port of Ningbo-Zhoushan. (Photo by Yao Feng / VCG via Getty Images) — ZHOUSHAN, CHINA – SEPTEMBER 01: Aerial view of a container ship Cosco France moored with the aid of tugs at Ningbo-Zhoushan Port on September 1, 2019 in Zhoushan, Zhejiang Province, China. The Cosco France container ship from Singapore will unload 8,015 twenty-foot equivalent containers (TEUs) at the port of Ningbo-Zhoushan. (Photo by Yao Feng / VCG via Getty Images)

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "World oil transport rates soar as US super-oil sanctions disrupt crude trade [Reuters]"data-reactid =" 100 ">World oil transport rates soar as US super-oil sanctions disrupt crude trade [Reuters]

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Sterling plummets after Bank of England decision makers announce lower rates [Yahoo Finance UK]"data-reactid =" 101 ">Sterling plummets after Bank of England decision makers announce lower rates [Yahoo Finance UK]

Endeavor abandons IPO despite market downturn [Reuters]

DoorDash hack data of 4.9 million customers, restaurants [Reuters]

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