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Comment by vv_ | Hacker News Reader

If no one cared about cash flow and profitability wouldn't SpaceX stock go up instead of down?

> If no one cared about cash flow and profitability wouldn't SpaceX stock go up instead of down?

In addition to looking at the "fundamentals" of a company like cash flow and profitability, there is also a 'meta-game' that traders (as opposed to investors) have to look at:

> A Keynesian beauty contest is a metaphorical beauty contest in which judges are rewarded for selecting the most popular choices among all judges, rather than those they may personally find the most attractive. This idea is often applied in financial markets, whereby investors could profit more by buying whichever stocks they think other investors will buy, rather than the stocks that have fundamentally the best value, because when other people buy a stock, they bid up the price, allowing an earlier investor to cash out with a profit, regardless of whether the price increases are supported by its fundamentals and theoretical arguments.

* https://en.wikipedia.org/wiki/Keynesian_beauty_contest

"whereby investors could profit more by buying whichever stocks they think other investors will buy, rather than the stocks that have fundamentally the best value"

I think one thing to point out is "everyone" in this context is probably the broader market, but the stock holdings aren't distributed uniformly. A few large investors could actually be sophisticated and unload a fortune and the rest of the shareholders could still largely still ignore fundamentals and suffer large losses. The broad market can be ignorant and the stock can (and is) be down, both things can be true.

People cared after the IPO but initially in far less informed circles I constantly heard from lower sophisticated investors bragging about how they'd been allocated X shares like they were Pokemon trading cards they managed to snag. They weren't very sensitive to the price, only to brag to their friends they had snagged them. After the shiny wore off and no one cared about how cool they were, they sold them.

That is to be expected with any high profile IPO.

No this was anomalous for an IPO. People were limited to something like 10 shares that they had to pre-order like they were special order trading cards with an order cap as direct recipients of the initial shares.

Usually the public starts buying IPOs in open market operations on the secondary market, which removes some of the shiny and "limited" factor.

I don’t think the allocation process changes the underlying point. The mechanics may have been unusual, but highly anticipated IPOs almost always attract buyers motivated by participation as much as valuation. Whether they got 10 shares through a special allocation or bought on the open market, there is usually a cohort that wants to say “I got in on the IPO.” Once the novelty fades, some of that demand naturally disappears. I’m not convinced that’s unique enough to call it anomalous.

Edit: why would this get flagged lol?

> No this was anomalous for an IPO. People were limited to something like 10 shares that they had to pre-order like they were special order trading cards with an order cap as direct recipients of the initial shares.

It all depends on your broker. My Australian broker gave everyone ~40% of their request and refunded the rest (typical Australian practice for IPOs). An American friend put in for >20x as much as I did with his US broker, they gave him nothing and refunded the full amount.

IPOs are designed to achieve a 20% pump, generally do achieve it, and did achieve it in the case of SPCX. Buying shares at the base of the pump that you are allowed to sell at +20% is a license to cash in. Why would anyone sell you those shares at that price, then? They are paying you to cultivate the "rare pokemon card" atmosphere that gets the less sophisticated investors excited and willing to buy the top. A dollar spent selling below-market shares to a promoter returns many dollars of exit liquidity. This is how investment banks make their IPO money and it's how social media promoters make their money. The promoters aren't the ones being fleeced. There are people who think they are promoters but are actually suckers -- but that's a separate matter. The price always tells the true story.

The company is still overvalued by a pretty massive multiplier

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