Archive of UserLand's first discussion group, started October 5, 1998.

Re: Salon IPO--everyone's missing the point

Author:kabir@our.st
Posted:6/24/1999; 11:21:55 AM
Topic:Salon IPO--everyone's missing the point
Msg #:7788 (In response to 7780)
Prev/Next:7787 / 7789

The dutch auction has been mathematically shown to produce prices near the fair market price. The fact that the price doesn't move much immediately shows that it is doing just that.

Mathematically proven? If there is a proven mathematical model for determining true value of securities, then someone should let Mr. Greenspan know about it.

Another view is that the price point stability is simply due to the fact that a very small fraction of the stocks are in play after the auction. (Because they were distributed widely and for cheap.) But does it mean that the valuation is a 'fair market price'? Maybe, maybe not. Is Salon worth $10? 10 cents? Zip? Who knows! We just have to wait and see.

The openIPO Joe may have just as distorted view of .com enterprise valuations as does DayTrader Joe. How, for example, did the lowest price bidder (@ $10 per) arrive at this figure? Salon's revenue stream? The Rosey future of net advertising? Their viable business model for content distribution on internet?

Its more likely that openIPO Joe has a different philosophy regarding equity ownership, and that's why he's bidding on an openIPO auction, since s/he [Josephine ;)] knows there will not be a big payoff by sundown. S/he bids for keeps.

The stable market price is much less exciting to news writers, but makes the IPO accessible to the average Joe. The fact that this type of IPO is less costly to the company is a bonus.

I agree with you, though I am not sure if IPO accessibility is the critical point of openIPO.

Why? Because since the openIPO process naturally deflates speculative tendencies, the equity stakes are spread much wider and seem to be far less volatile than traditional IPOs. The net result of this is that the stock price points will tend to be stable, and disconnected from the speculative bubbles of the market at large.

So getting in on an openIPO is not the same thing as getting in on a hypescam IPO: It is not a get rich quick scheme. The value to Joe is accessibilty to equity.

IMO the value of the process is in its natural tendency to attract companies and investors who are interested in creating Long Term value; and in its fortunate tendency to repel speculators.

The net result is good for the company (selective & dedicated investors), good for the shareholder (committed company), and good for the rest of us (stable equity markets).

Its just not very sexy.

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