JP Morgan to Grant IPO Access to Everyone

I am perhaps to cynical here, feel free to dismiss my rant, but as Andressen pointed out a lot of the "value" is being captured on the internal rounds these days, not post IPO. And what that means is that when a stock comes to market it can be "hard" to get the valuation of the company to match its last round, much less get it above that. And as we saw with Box, coming in under often means having to accommodate your late stage investors some how.

So lets bring in retail investors! And with enough of those folks we can have them raise the price of the IPO roadshow and well if the price is flat to down after that and they lose all their money, too bad. But hey they were "in at the IPO" right? Watch your prospectuses closely boys and girls, I bet on these same IPOs we'll have "investor participation" which is code for the late stage investors selling their shares in the IPO rather than having the company collect the proceeds.

See? JP Morgan thinks they are doing everyone a favor and all I can see is a barely disguised scheme for the private investors to fleece the retail folks out of their money.

During the Dot-com Boom, allocations of shares in hot IPOs were highly sought after, as investment banks seemed to consistently price the offerings to guarantee a pop in first-day trading, and award allocations to their favoured clients. Effectively, the investment banks were under-pricing the shares such that the company going public "left money on the table", which got picked up (at relatively low risk) by the i-banks' preferred clients.

Companies seem to have grown wise to this and started putting more pressure on the i-banks to ensure they don't end up leaving money on the table (c.f. Facebook, Pure Storage). Therefore, the i-banks' favoured clients are less interested in taking IPO allocations, so the i-banks need to widen the net to find more investor demand.

1: http://www.wsj.com/articles/SB108328345314098183

2: http://www.cnbc.com/2014/08/19/es-took-off-but-the-auction-d...

Those pre-IPO shares aren't gonna unload themselves before the price crashes, ya know.

I personally am for everyone having equal access to IPOs and start-up funding and such. Anything else is opposed to the founding principle of this country of personal liberty-- and it's also opposed to reducing the wealth disparity.

In summary, it's not your job to protect me from myself.

The problem is, if their strategy works, the public would be way more exposed to risk like they were in 99/00 and any bubble bursting would have big impacts. As of now any bubble wouldn't have that widespread of ramifications.

On the flip side, this would likely drive markets up for a while and show a paper "improvement" of the economy because the numbers are public and auditable. Wouldn't last though.

AKA "Hey boss I heard these index fund things were popular. Let's get in on that, but make it EXCITING!"

It looks like, at the very least, Motif doesn't charge you an annual fee for the privilege of buying 30 stocks in one click.

In India, IPOs approved by SEBI (the equivalent of SEC in the U.S.) have been available to all retail investors for a very long time and has improved a lot with online brokerages over the last 15+ years. You just need to have a demat account, which you could also open along side the application for the IPO. I don't understand why companies going public in the U.S. wouldn't want a wider reach for IPOs, which can easily come by getting retail investors to participate.

Consider a company that wants to raise $100. Suppose there are 19 buyers who value a share at all different prices from $1 to $19, and are willing to buy 1 share each. The issue price will be $10. Those who offered $1-$9 will not get an allocation; those who offered from $10 to $19 will. The buyer who thinks a share is worth $19 will probably buy some at a > than $10 price, so voila a pop.