May

6

 I came across this article today: "Royal Mail float scandal: how hedge funds cleaned up"

Is it not the case that, for almost every IPO in history, the first days of trading are typically vastly outsized volume days in the stock? And that good underwriters will put in the book shareholders with a mixture of holding time horizons, thus ensuring two way liquidity upon listing? And that the point of a share listing is to provide ready liquidity and freedom to chose to buy or sell shares at any given moment?

For example, what percentage of retail owners "flipped" their stock straight out of the gate? Was this higher or lower than the mean and nasty hedge funds (as portrayed)? And if the hedge funds flipped their stock overnight (to presumably more loyal and less mean and nasty buyers), did they not actually forgoe substantial gains versus the longer term holders, and thus it is they who are really greedy and bad for wanting profits (per the article's logic)?

Or perhaps next time, lets hold a seance for Oliver Cromwell's ghost and have him run the IPO?

Gary Rogan writes: 

There is an interesting contrast between these two parts of the article:

1. An analysis of Royal Mail's share register shows that Och-Ziff, an aggressive US-based hedge fund, had a holding of 10 million shares on 15 October, the day the company's shares started trading. A week later it had reduced its holding to 3.5 million shares. It is not known if Och-Ziff was allocated shares or bought its holding from other institutional shareholders who sold out as soon as shares started trading.

vs.

2. "We wanted to make sure that the company started its new life with a core of high-quality investors who would be there in good times and bad, interested in Royal Mail and the universal service it provides for consumers over the long term. We were told if we sought a higher price, these investors would have walked away, leaving the company exposed to short-term hedge funds with different objectives." Mr Cable in an interview in December 2013 "Having a long-term investor base remains a basic objective, and we have achieved that fundamental objective."

Was the second part a statement by a crook or an idiot, considering the first part? Regardless this supposed contrast between the benevolent, long-term "lord of the manor" holder vs. the evil speculator is something both Dickens and Marx would appreciate, but perhaps for different reasons.


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