Was waiting for you to hit this topic, my friend! 😉.
So much to say here… and not enough time/space to do it in a comment. Agree with most of your analysis… but as someone who spent many years with a front row seat on this (as a banker), I will tell you that the idea that a large portion of the shares that were sold to institutions are “held” — thus making the float even a lot smaller than 8% — is almost certainly wrong. In fact, most of the institutions do flip — especially when there’s a big pop. The public never gets to see this directly, but the companies (and the bankers) get to see it when they compare the institutional holdings (reported every quarter after IPO) with the allocations at the IPO.
There is no question that these allocations to the large institutions are highly sought after — in effect, gifts. But those promises that the positions will be “held” just generally don’t pan out for most of them, hedge fund or not!
That makes sense. And fwiw I was referring to the effective float in the first couple of days (driving the stock up 250%). Do you think a significant amount flipped before then? But makes sense within the first quarter or two, but am surprised on the percentages you mentioned…higher average then I thought
100% and thanks for the additional insights - and I tried to touch on that here but especially true when it pops 250% on one day…and I think that’s where we have seen some big drops in the days after. So they will flip to some extent but some will go in assuming longer term holding (unless their 3 year target is met in one day…)
How much and when do you typically see these long-term holders typically sell?
No way to know whether they flip Day 1, 2 or 30. But — if you’re at the company or one of the banks, you can see if it happens within the first quarter after IPO — if they bother to do the work and find the data from the filings.
As for the amount/number that flip: on a typical deal, 75%+ of the shares flip within that first quarter. And given the long tail of institutions (with most getting hardly any shares), >90% of the institutions who get allocations flip, typically. And when they make as much money as they did on a deal like Figma in so few days, it’s hard to blame them.
Now, over time, many of the strong, larger institutions come back in to the stock, building positions as the stock settles down and the company proves itself. But that takes a number of quarters. That, by the way, is the counter-argument people defending the existing IPO route and process will make.
Was waiting for you to hit this topic, my friend! 😉.
So much to say here… and not enough time/space to do it in a comment. Agree with most of your analysis… but as someone who spent many years with a front row seat on this (as a banker), I will tell you that the idea that a large portion of the shares that were sold to institutions are “held” — thus making the float even a lot smaller than 8% — is almost certainly wrong. In fact, most of the institutions do flip — especially when there’s a big pop. The public never gets to see this directly, but the companies (and the bankers) get to see it when they compare the institutional holdings (reported every quarter after IPO) with the allocations at the IPO.
There is no question that these allocations to the large institutions are highly sought after — in effect, gifts. But those promises that the positions will be “held” just generally don’t pan out for most of them, hedge fund or not!
That makes sense. And fwiw I was referring to the effective float in the first couple of days (driving the stock up 250%). Do you think a significant amount flipped before then? But makes sense within the first quarter or two, but am surprised on the percentages you mentioned…higher average then I thought
100% and thanks for the additional insights - and I tried to touch on that here but especially true when it pops 250% on one day…and I think that’s where we have seen some big drops in the days after. So they will flip to some extent but some will go in assuming longer term holding (unless their 3 year target is met in one day…)
How much and when do you typically see these long-term holders typically sell?
No way to know whether they flip Day 1, 2 or 30. But — if you’re at the company or one of the banks, you can see if it happens within the first quarter after IPO — if they bother to do the work and find the data from the filings.
As for the amount/number that flip: on a typical deal, 75%+ of the shares flip within that first quarter. And given the long tail of institutions (with most getting hardly any shares), >90% of the institutions who get allocations flip, typically. And when they make as much money as they did on a deal like Figma in so few days, it’s hard to blame them.
Now, over time, many of the strong, larger institutions come back in to the stock, building positions as the stock settles down and the company proves itself. But that takes a number of quarters. That, by the way, is the counter-argument people defending the existing IPO route and process will make.