>Those last two major investors lost a lot of money.
Depends, actually, on how much of their stock they sold at the IPO price. Box is already trading above the last round valuation even though the IPO was priced below it.
> the company has a private post-money valuation of $10B and then IPOs to a stable $10B market cap.
If that’s the case, and they issue 100M new shares on IPO, then the IPO is effectively a serious “down round” that halves the value of all shareholders pre-IPO.
More realistically would be that the post-money valuation after IPO is $20B or more.
> But a loss for the investors that bought the stock on the open market.
It's a loss for speculators who gambled that it would go up. I'm lacking sympathy for people who snap up stock at IPO and assume it can't possibly drop.
> A 'drag down' is never a good thing for a stock.
It's a great thing for anyone who wants to buy at the lower price.
> They could have IPO'd for less money ;) Then they wouldn't have needed to squeeze so hard.
In retrospect maybe, but 2020s was the time of scaling a company and you needed capital to do so.
Could it be that they fell victim to bad market timing and if the markets would have continued to be like 2019-2020, their shares would be at $160 and not $32?
> They ran their own IPO and you can be sure as hell that partners didn't want to leave any money on the table.
The optimal return for partners probably is giving the institutional investors a pop on even your own IPO so you keep them as investors for future IPOs where you are collecting fees. When the institutional investors lose money on an IPO, are they going to come back to you for the next one?
> The narrative between those two scenarios is drastically different.
Who cares about the narrative unless you need to raise capital again soon? The money you get in an IPO actually goes into the business, while the trading price of the stock has no impact on the business.
Speculators that bought and sold to make a profit today.
I bought a few hundred shares, sold about half of them (guaranteeing a profit even if the other half crashes to 0) and am holding the other half as either a long term investment or waiting for the next pump and dump.
> So basically the IPO is a way to formalize the initial price of the stock. By bypassing that process, they will sell for whatever the market dictates for better or worse, is that correct?
No, IPO is the placement of the shares from whoever has them before the IPO position ( underwriter or the company itself ) to the accounts of those who want to have those shares the moment before the new issue is listed on an exchange.
Buying at the open is not buying at the IPO.
Company X selling shared to underwriters at $7/share is not an IPO.
Underwriter pricing shares that it bought from the company for $7/share at $11/share and delivering those shares to the Suzy Investor who wanted to buy that company before the shares open is the IPO.
Suzy Investor selling shares at $11.05 which is the national best bid the second after the stock opened to John Q. who did not get the shares from the underwriter is NOT the IPO.
> One would hope your stock is appreciating in value at an equivalent or greater pace than your income
One would, but given the stock performance of GRPN or ZNGA, or more recently HDP and BOX, I'd be leery of this.
Betting that you happen to pick the unicorn that's gonna IPO is a tall order. Betting that you happen to pick the IPO'ing unicorn that isn't going to fall apart post-IPO seems like too much to ask for.
> I don't see how valuation matters. Did they loose money?
Do you know that they are a publicly traded company? Losing money is exactly what happens when the stock price falls. When you lose more than half of your value, going out of business is a serious risk.
Depends, actually, on how much of their stock they sold at the IPO price. Box is already trading above the last round valuation even though the IPO was priced below it.
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