Managing the total amount of money so that investment bubbles peter out before they get excessively big is supposed to be the central bank's job.
What ROI? There was no return, and there currently isn't any return on investment, because those companies did not exit yet!
The exit plan is to offload overpriced shares, that they paid billions for, onto the public market. If they don't IPO, those investors get nothing.
I keep seeing these unsubstantiated claims. They’re out to get us and just pump and dump on public markets!
Yet, before they IPO they have to go around and do what? Who sets the IPO price? Who buys the shares? If the shares tank, the valuation of the company goes down and locked up shares lose value. It’s not really in anyone’s interest for IPOs or investments to fail and while pump-and-dump schemes certainly exist they are not the norm. The conspiracy theory level of distrust and cynicism is not healthy and makes one a very poor investor.
If individual investors are buying shares and getting blown up, that’s their problem. Invest and due your own research. Broad market funds exist and have so for decades. Most financial advisors even will put you in to those funds and corporate 401k plans while increasingly allowing for more investment flexibility (freedom is good) default and educate employees by default on target date funds and index funds. There is a wealth of information out there.
"Oh no, my $10B became $5B!"
They'll still be happy.
> If individual investors are buying shares and getting blown up, that’s their problem.
Having the general populace fleeced by bad actors is everyone's problem, eventually.
> Having the general populace fleeced by bad actors is everyone's problem, eventually.
Sure. Creating false narratives and parroting unsubstantiated misinformation and fear mongering is everyone’s problem too.
The flaw in your thinking is assuming it's actually worth the IPO price.
If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.
Then don't buy it at the IPO price? The bullshit artist will have to lower their price until there are takers in the market.
> If I'm a bullshit artist, $100 is great, $50 is good, and I'm just trying to avoid the $0 scenario.
They're not bullshit artists, they're greedy. If you think you're pulling one over on someone $100 is great but $200 is better - might as well see if you can get $200. Since we're just making up random people and motivations.
I think you're getting lost here.
If I invested $0.50/share, I know my company is worth realistically $10/share, and I can convince you to buy at $100/share, and it plunges to $50/share before I can offload, I am still a pretty happy camper.
Retail investors are the marks, not the scammer here.
> They're not bullshit artists, they're greedy.
Those aren't mutually exclusive.
Musk is both, for instance.
> Retail investors are the marks, not the scammer here.
Retail investors who aren't sophisticated enough to do analysis and evaluate equities shouldn't buy them less they potentially lose (or make) money. You're inventing a scam and scammers where none exist here. Uninformed retail investors, and who knows how much money they even have, should be buying index funds which is what is advised by investment firms, CFPs, and more.
No, I am not. That’s the “it plunges to $50/share before I can offload” period.
Even in this contrived scenario, a stock plunging to 50% of its IPO price doesn't indicate much. It can still be a good investment. Stocks are punished for non-material things all the time.
Even when these mythical scammers that you've completely made up decide to sell, they need willing market buyers. If those market buyers are sophisticated investors then who cares if they lose money - you know the risks.
If they're retail investors then they shouldn't be buying individual stocks in the first place without conducting proper research which would tell them the stock is a good or bad investment based on their own criteria. As I've already mentioned, the default advice and what is common in the industry is to purchase index funds or target date retirement funds. If you go off and buy some stock at IPO you should have done your research, or you can live and die by the results of your investment. Sometimes you even make money.
I'm just not going to accept you or anyone else just making stuff up like this when I see it, calling things pump-and-dumps, and then walking away as though you have some fait accompli and it's all rigged and all the scammers are just scamming and screwing you. There are guardrails, regulations, rules, and standard advice. If you go buy some high-flying IPO and you lose money that is your fault. Learn to be responsible for yourself and stop projecting your own failure and cynicism on others. Cynicism is the refuge of the most foolish of people.
IMO, those shares are overpriced even at private investment levels, but my opinion is still irrelevant to the fact that there is no ROI until the investors exit!
Nobody forces you or any other individual investor to buy shares in their “pump-and-dump company” when it lists.
Who knows? Who cares? My point is that until those investors exit, there is no ROI.
The comment I originally responded to was talking about investors getting ROI from AI companies. I'm pointing out that no such thing will happen until the investors exit.
Ok well they can just exit in private markets before these shares are "dumped" on public markets. Therefore there is an exit and ROI. QED.
Anyway your overall point, which was a bad one I'm sorry to say, was about investors dumping shares of overvalued companies on public markets.
You are ignoring things like lockup periods, vesting schedules, and other general machinery that specifically exist to prevent day 1 or short-term dumps of shares. It's not in the interest of the company that is IPOing or the bank - how can the investment bank go to investors and market securities and then on Day 1 those securities (because it's a pump and dump remember?) drop by 10% - 20% - 30% or more. That's bad business and investors will leave investment firms that did that.
When one of these "overvalued" companies IPO (and let's be honest, you don't know how to value these companies anyway so your accusation of them being overvalued is faulty from the start), someone has to buy those shares. If everyone starts selling, the value of the company and the value of the shares drop unless there are buyers. This doesn't really serve anyones interests and even better, you as an individual investor don't have to be a buyer! If someone wants to buy because their own model says it's worth it, that's up to them to decide, not you. Fortunes are made betting against the market (and betting in the general direction of the market). If someone wants to forgo buying, that's fine too.
For investors who don't know about the values or models of valuations of securities they can just take industry standard advice and buy index funds or target-date retirement funds. Stop infantilizing people and assuming that because you lack the knowledge that others must too, or that everyone is just out to scheme and "dump" on public markets, especially without any evidence or without considering how the IPO machinery typically works, who buys these shares, or the incentives.
Oracle paid out 5 billion in interest last fiscal year.
Well, they certainly tried to, with SpaceX.
Information is only relevant in the long term, in the short term the stock market is about FRIENDSHIP.
Just friendship and love :)
This is simply absurd. Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). It's the 1920s all over again; publicly pump and privately sell into the demand you're creating. I'm guessing you're perfectly fine with this behavior from the largest market participants?
It's not the 1920s all over again.
> Of the investment banks that helped SpaceX IPO, Goldman Sachs has their price target at $205 (139x implied price to sales), JP Morgan at $225 (152x implied P/S), Deutsche Bank at $255 (173x implied P/S), Morgan Stanley at $300 (203x implied P/S), and Raymond James at $800 (542x implied P/S). ... I'm guessing you're perfectly fine with this behavior from the largest market participants?
Who do those investment banks sell to? How familiar are you with, for example, Goldman Sachs finding buyers for SpaceX shares? The minimum account requirement at Goldman last I checked was something like $10mm - do you really care if such investors are buying shares in overvalued companies or, like me, declining to purchase?
You are just throwing things around and not providing a coherent argument. Everyday investors don't have to buy these shares. They can continue to follow industry standard advice to buy total market index funds, or target date retirement funds or whatever. Investment banks sell to high net worth individuals who are by definition sophisticated investors - they know and accept the risk of such offerings. So no I don't care even a tiny bit if a Morgan Stanley client decides to buy what you consider to be overpriced shares in a "pump-and-dump" scheme based on your own certainly flawed and unsophisticated valuation of SpaceX or any other company.
And you can just not buy the shares. It's very straightforward.
Sure, but the SEC exists, in theory, to make that decision one you can make an informed decision on, because con artists don't typically put a disclaimer in that says "this is bullshit".
Most retail investors suffer from significant information asymmetry. We have regulations, in part, to mitigate this fact.
> Just because you think something is bullshit doesn't mean it is.
A point you yourself might remember when arguing on the internet.
I don't disagree - however that's a separate point from the OP's it's all a scam and pump-and-dump sentiments and doesn't detract from any point I've made.
> A point you yourself might remember when arguing on the internet.
I know it feels great to write things like this but I don't care - my point stands alone and it's only applicable to you and what you wrote regarding valuations.
A pump and dump scam doesn’t care if valuation goes down as long as they can exit profitably.
Already explained things like lockup periods. Investment firms marketing the IPO also do. not. want. IPO prices to crater after the IPO. It makes them look bad, it harms their business, investors will avoid shops that loop them in on what turn out to be obvious scams or whatever. But even if they don't, who cares? They (I) are sophisticated investors. If I make a bad investment I'm an adult with means and I can live with the consequences.
Why didn't I buy the SpaceX IPO? Because I think it's a crappy investment! They tried to pump-and-dump but they sure couldn't catch me. See how easy it is?
I feel like you're unclear on what information asymmetry means.
This is "just don't get murdered!" style advice.
> Why didn't I buy the SpaceX IPO? Because I think it's a crappy investment! They tried to pump-and-dump but they sure couldn't catch me. See how easy it is?
The naïve retail investors you suggest should buy index funds will be exposed to SpaceX and the other AI companies through them, no?
You're exposed to any company that hits the public market, depending on which ETF you buy. Could be the S&P 500 or a Total Market Index or some mix of those two plus international ETFs. You name it. Of course that's the downside of the ETF, but it's also the upside because the assumption is you can't pick winners and losers in the market so you buy them all.
I think, for example, Microsoft is a terrible investment because almost all of their products suck ass. I have shares though through an ETF and that's the price I pay because while I think it's a terrible investment I could be wrong. Just like you can be wrong about SpaceX.
Your point of contention here really just doesn't make a lot of sense.
You're declaring IPOs like SpaceX to be pump-and-dumps but not providing your own research and valuation model, and then at the same time complaining that retail investors who aren't doing their own research are going against industry advice and buying those IPOs, while also complaining that big banks shop IPO deals (as they have done for a century) to their high net worth clients who are... responsible investors who are making sophisticated decisions? And of course you're ignoring the fact that in order to offload bags one has to find someone to offload those bags to, there are lockup periods, due diligence, and other mechanisms in place to prevent or mitigate the scenario you are describing because it is bad business and you can be sued for doing shady things.
And you know what, maybe you're just wrong about SpaceX[1] and because the retail investors have shares due to the ETF they make more money than they otherwise would. In other words, calling something a pump-and-dump is just like, your opinion.
[1] I have no shares in SpaceX and don't care much about the company one way or the other besides being generally positive on space technology and exploration. I think Elon Musk is a loser, and I also don't own any direct shares in Tesla.
Nice strawman, but that's not what I said.
They can, and do, intervene in things like lying to investors to inflate valuations.
https://x.com/elonmusk/status/2075291102324641925
At what point does the optimism become a lie?
Of course, the aspiration and attempt may fail, but in this quote they did say if.
You're letting your dislike/distrust of Elon Musk cloud your judgement. If you don't like him or don't like what he says, don't buy shares in his companies, don't buy his products, and don't read what he writes.
I can do this, too, you know? "Nuh uh!"
> What's the total value of all minerals and resources on Earth.
That seems like an odd definition for Earth's value.
> You're letting your dislike/distrust of Elon Musk cloud your judgement.
No, I'm considering the fact that he has provably (in court!) lied about stuff like this, repeatedly, to the point of the SEC slapping a minder on the guy's tweets for a while.
It's not, you're just being argumentative for no reason.
It's very normal for someone to value a planet or other celestial body in terms of the value of the minerals or other resources on that body.
You can ask for clarification from them for what they really mean though, but just calling it an outright lie doesn't seem accurate.
> No, I'm considering the fact that he has provably (in court!) lied about stuff like this, repeatedly, to the point of the SEC slapping a minder on the guy's tweets for a while.
Don't buy shares in his companies if you don't like their business plans or believe their assumptions. Use your own judgement, create your own models, make your own assumptions.
Aww, twinsies!
> It's very normal for someone to value a planet or other celestial body in terms of the value of the minerals or other resources on that body.
I don't think anyone has really had to value a planet yet.
(I'd assert Earth is at least as priceless as, say, the Mona Lisa.)
> Don't buy shares in his companies if you don't like their business plans or believe their assumptions. Use your own judgement, create your own models, make your own assumptions.
I have to live in this economy, unfortunately.
Sure but that applies to all of us with anything we disagree with. I think taxes are too high. "Blah blah do XYZ" I can just say "I have to live in this economy, unfortunately.". Ok.
Your argument is basically "in my opinion SpaceX is overvalued, therefore a lot of pump-and-dumps are going on and retail investors are buying them and losing money, therefore the economy is rigged" or something along those lines. Feel free to reframe it how you'd like but that's the gist of it. At the end of the day it's just not very coherent and I've repeatedly pointed out systematic reasons that it's wrong, I've pointed out how your valuation of any specific company is incomplete, and finally as you've tried to piece these things together you still have not made a consistent point and you've meandered around basically just complaining without really bringing anything to the table here. If SpaceX or any other company that is going to IPO is a pump-and-dump, show your work. At the end of the day it's just your opinion, and one in which most of society disagrees with.
> I don't think anyone has really had to value a planet yet.
Sure, but that doesn't mean it's not possible or that you can't actually value the resources and minerals.
> (I'd assert Earth is at least as priceless as, say, the Mona Lisa.)
I'd mostly argue the same, but what something is worth is mostly just an opinion.
If Oracle is highly leveraged or betting the farm on AI, then their credit worthiness goes down.
Alternatively, if money floating around to make loans is drying up, companies have to offer better terms to attract the dwindling supply
Those are intrinsically linked to ORCL equity. ORCL needs an ROI to service their debt.
There are different ROIs which are not the same, even if related.
In what sense?
This may be related to the commonly-held fallacy of "cash on the sidelines". Cash is always on the sidelines. Cash is not created or destroyed by buying and selling stocks or bonds. Cash is simply handed from one party to another, but the cash has to be held by somebody.
Downgrade of credit worthiness is different. That depends on how leveraged the company is
What? No it's not, and never has been.
Without even getting into the practical vs. theoretical of Fed dual mandate (funding deficits), even the most uncharitable take on modern CBs wouldn't suggest this.
https://en.wikipedia.org/wiki/Tulip_mania
> No of course there isn't enough capital for all of this. Having said that, there is enough capital to do this for a at least a little while longer. -- Gil Luria (Managing Director and Analyst at D.A. Davidson)