Tesla Motors IPO, Day 1(google.com)
google.com
Tesla Motors IPO, Day 1
http://www.google.com/finance?q=NASDAQ:TSLA
55 comments
My dream would be for Tesla Motors to become the biggest and most-loved of the "big 4" US automakers, along with Toyota, Nissan, and GMFordysler. I respect the money, engineering, and guts it took to start that company.
I am conflicted in regards to situations like this one. For one, I am interested in invested in vehicles like this not just for the profit potential, but for what I feel is a genuine social / environmental good; at the same time, I hate the idea of being burned by putting principles before money; I continue to search for ways to make socially responsible investments that don't have the same risk profile as equity.
Thoughts?
Thoughts?
As an outside investor, you're unlikely to be able to tell genuinely socially responsible investments from greenwashing. For example, how are you going to tell the difference between a environmentally net negative windfarm investment that only exists to help itself to government subsidies and tax treatments, with a windfarm that is a net positive in terms of environment and investment cashflow?
My advice would be to optimise your investing strategy while ignoring the actual investment vehicle, then putting the returns to work in a way that you can see the direct results. You can avoid companies that truly offend you if you must. So invest in a financial services/ IT company that produces the returns you need, then spend those returns on an environmental/social improvement project in your local area, whether it is a pollution cleanup or a skill training centre. This is the same strategy as Bill Gates, just on a smaller scale.
My advice would be to optimise your investing strategy while ignoring the actual investment vehicle, then putting the returns to work in a way that you can see the direct results. You can avoid companies that truly offend you if you must. So invest in a financial services/ IT company that produces the returns you need, then spend those returns on an environmental/social improvement project in your local area, whether it is a pollution cleanup or a skill training centre. This is the same strategy as Bill Gates, just on a smaller scale.
The fact that you like what a company is doing should be a major factor in whether or not you invest in them, in my opinion.
Investing money is putting it to work. You can get monetary returns on an investment, but you also help the company do whatever it is doing, which is a sort of return. There's really no bright line between charity and investing. You just have to be aware of what kinds of returns you are looking for.
Investing money is putting it to work. You can get monetary returns on an investment, but you also help the company do whatever it is doing, which is a sort of return. There's really no bright line between charity and investing. You just have to be aware of what kinds of returns you are looking for.
I think there can be too many people investing in a single / finite entity, at which point you can either try to profit by shorting, likely lose money by trying to invest further, or wait until people leave (and with high volatility likely there will be a time when the price is right).
Shorting is risky so I think you're out of luck. Just keep waiting for a good buy opportunity.
Shorting is risky so I think you're out of luck. Just keep waiting for a good buy opportunity.
There are plenty of ethical/green/socially responsible mutual funds.
Right, but what I mean is, something that has less volatility / risk than equity, but similar 'social good' profile. Like, some vehicle that was responsible, environmentally sound fixed-income or suchlike. I wish there were a way to park money short / medium term that was also 'good.' I know (And have invested in) clean energy ETFs and the like, but not really hitting on what I'm looking for, which is something where I'd be satisfied with a much lower return (potential return, obviously) in exchange for just peace of mind knowing that the investment is at least a bit helpful versus say, just feeding the financial-services-industrial complex that has caused so many problems.
Has anybody bought some today?
I'm also wondering how often an IPO does not go up on the first day(s). I'm not following this at all, but I remember Google's IPO where it seemed pretty obvious that a quick flip was guaranteed on the first days (even though it would have been smart to hold onto it).
I imagine that when Facebook does its IPO a similar excitement will bring prices up initially.
I'm also wondering how often an IPO does not go up on the first day(s). I'm not following this at all, but I remember Google's IPO where it seemed pretty obvious that a quick flip was guaranteed on the first days (even though it would have been smart to hold onto it).
I imagine that when Facebook does its IPO a similar excitement will bring prices up initially.
My only foray (to date) into shares was an IPO that didn't go up. My logic was much the same as your statement - don't these things always go up on the first day? I'll just get in early, get out on day one, make a profit.
(I was at university, so making a few hundred bucks and learning on the fly seemed like great returns!)
I purchased for 50c / share. Looked set to open at 55c, but a heap of stock got dumped right before it opened so it opened at 48c. I got out at 47c on day 2; the stock was at 5c twelve months later.
So I learnt a lot about research and business fundamentals from that. About six months later I tried again but missed out due to oversubscription - would have 4x my money on day one, more for those who bought and held on for a takeover 12 months later.
(I was at university, so making a few hundred bucks and learning on the fly seemed like great returns!)
I purchased for 50c / share. Looked set to open at 55c, but a heap of stock got dumped right before it opened so it opened at 48c. I got out at 47c on day 2; the stock was at 5c twelve months later.
So I learnt a lot about research and business fundamentals from that. About six months later I tried again but missed out due to oversubscription - would have 4x my money on day one, more for those who bought and held on for a takeover 12 months later.
I've always wondered how one gets in on the ground floor of one of these IPOs. Is it just large institutional investors that got this stock at $18/share? Or could I have placed an order through my usual broker?
Also, if the stock is worth $24 after the first day, didn't Tesla just get screwed out of a whole bunch of capital? Seems like they could have sold the shares for more (although, I suppose they probably held on to some shares so they are making some money off of the rise in price, and I'm sure their employees with equity are happy about it too)
Also, if the stock is worth $24 after the first day, didn't Tesla just get screwed out of a whole bunch of capital? Seems like they could have sold the shares for more (although, I suppose they probably held on to some shares so they are making some money off of the rise in price, and I'm sure their employees with equity are happy about it too)
These are all very good questions. About how one gets in on the ground floor -- the IPO is done by an underwriter, which usually an investment bank. Before the IPO the investment bank sets up sales sessions with a lot of their friends/big clients, and gets them to promise to buy shares at the initial offering price. When the IPO happens every one that was initially approached by the bank and promised to buy shares sends in their money and gets their shares and then they are free to resell the shares on the open market.
So about how you get onto the ground floor -- you have to be one of those special people the bank calls. (note that this is the "classic" way things happen, some IPO's, such as the Google one were different).
There have been some accusations that the underwriters use IPOs to make a lot of money in addition to their deserved fees. The accusation is that the underwriting Ibank will sell and IPO to a friendly investor for a very depressed price, so that the friendly investor is guaranteed to make money selling the stock as soon as trading opens. To express his thanks, the friendly investor will then find a way to pay the ibank for its trouble. For example, the friendly investor can use the ibank as a broker for his stock trading, even though the ibank has sky high fees. And of course the victim is the company that does the IPO, which as you said, gets screwed out of a whole bunch of capital, and even worse they end up with a market capitalisation that is much higher than the actual capital and assets that they own, so they will face unfairly high expectation as to their future profits.
This theory was first and best articulated by professor Coffee of Columbia Law School in an NYT article. So if you are curious you can try to do a search (I could not find the article myself). Prof. Coffee is a very smart guy and happened to be my securities law teacher.
The banks of course dispute the theory. The banks' argument is that they need to place the initial shares to their friends and known clients, and they need to have the price somewhat depressed in order to sell all the stock of the offering. Otherwise it would not be certain how much stock they can sell for what price, so they run a risk of having the offering fail (i.e., not sell all the offered shares). If an offering fails it is considered a disaster for the company doing the IPO.
There is however an alternative. It is called a Dutch auction, and in it potential investors bid for the initial shares in an auction. Thus, the proper price can be discovered and it is more likely the offering will succeed. Also, in a Dutch auction much more people can take part in the initial offering.
Google did their offering by dutch auction and it was much easier to get in on the offering for the Google IPO. You just needed to have a brokerage account in one of the banks that did the IPO (and this included most major ibanks) and you could bid for IPO shares. The ibanks were not very happy with Google's choice to do a dutch auction, but they were Google, so the banks did it anyways.
So about how you get onto the ground floor -- you have to be one of those special people the bank calls. (note that this is the "classic" way things happen, some IPO's, such as the Google one were different).
There have been some accusations that the underwriters use IPOs to make a lot of money in addition to their deserved fees. The accusation is that the underwriting Ibank will sell and IPO to a friendly investor for a very depressed price, so that the friendly investor is guaranteed to make money selling the stock as soon as trading opens. To express his thanks, the friendly investor will then find a way to pay the ibank for its trouble. For example, the friendly investor can use the ibank as a broker for his stock trading, even though the ibank has sky high fees. And of course the victim is the company that does the IPO, which as you said, gets screwed out of a whole bunch of capital, and even worse they end up with a market capitalisation that is much higher than the actual capital and assets that they own, so they will face unfairly high expectation as to their future profits.
This theory was first and best articulated by professor Coffee of Columbia Law School in an NYT article. So if you are curious you can try to do a search (I could not find the article myself). Prof. Coffee is a very smart guy and happened to be my securities law teacher.
The banks of course dispute the theory. The banks' argument is that they need to place the initial shares to their friends and known clients, and they need to have the price somewhat depressed in order to sell all the stock of the offering. Otherwise it would not be certain how much stock they can sell for what price, so they run a risk of having the offering fail (i.e., not sell all the offered shares). If an offering fails it is considered a disaster for the company doing the IPO.
There is however an alternative. It is called a Dutch auction, and in it potential investors bid for the initial shares in an auction. Thus, the proper price can be discovered and it is more likely the offering will succeed. Also, in a Dutch auction much more people can take part in the initial offering.
Google did their offering by dutch auction and it was much easier to get in on the offering for the Google IPO. You just needed to have a brokerage account in one of the banks that did the IPO (and this included most major ibanks) and you could bid for IPO shares. The ibanks were not very happy with Google's choice to do a dutch auction, but they were Google, so the banks did it anyways.
Otherwise it would not be certain how much stock they can sell for what price, so they run a risk of having the offering fail (i.e., not sell all the offered shares).
To clarify: usually the underwriters take the risk of selling the shares. If they don't sell all of offered shares to the public, they have to buy the remaining shares themselves.
To clarify: usually the underwriters take the risk of selling the shares. If they don't sell all of offered shares to the public, they have to buy the remaining shares themselves.
I don't understand the conspiracy theory. The investment bank will only agree if kickback > shortfall, and a big investor will only agree if kickback < shortfall. Obviously I'm missing something. Why can't the investment bank sell directly on the market in the first place?
It's the company going public that is offering the shares so the IB doesn't suffer as much if the price is lower. The shortfall is the company's while the kickback goes to the IB.
I think it is to try to avoid the appearance of impropriety even while still having the appearance of impropriety for anybody who (like us, presumeably) is not totally incapable of keeping track of which peanut the shell is under in the shell game they're playing.
You can describe much of Wall Street and Washington, DC as a shell game. So my pet theory goes. :)
You can describe much of Wall Street and Washington, DC as a shell game. So my pet theory goes. :)
As I see it it's not so much a 'conspiracy' as a set of misaligned incentives, which cause some parties to 'naturally collude' against the offering company, even if they (colluders) don't explicitly agree on this.
So why don't other companies doing the IPO organize an auction for their shares like Google then ? Cause in theory an auction is one of the efficient ways to get the market cleared, or shares are priced accordingly to their value.
I used to daytrade IPOs like crazy during the 2006-2008 period. From what I read from the many IPO boards that I participated, you need to have an account with the underwriters of the IPO in order to get allocation. Usually, these premium accounts have higher fee and your balance must be above some amount ($50k-$100k). When there's an IPO you can ask for shares, and the underwriters use this information to gauge how hot the IPO is and adjust the offer price. When they allocate you shares, you can decide to take it or not. Some people say they rank you based on how often you fulfill your promise, so if you always ask for shares but seldom buy you won't get allocations for hot IPO.
I don't have these types of accounts so I never get pre-IPO allocation, but what I did on IPO day was continuously refreshing the page to catch when it's first open (IPO usually open b/w 10am-12:00). You can almost always buy at lower price than the offer price within the first 15 minutes. Most IPOs (~80%) close lower than the offer price on the first day, and they continue to go down after that, you don't want to touch these. The remaining 20% are hot, and you know they're hot b/c the underwriters keep bumping the offer price up. I only played these and for very short term, from only a few minutes to a few days.
I'd time when the price starts bouncing back after the first 15 minutes, probably b/c more people realizing the stock is opened to the public and buy in, and buy 300-400 shares. After about 20 minutes of insane rising, the price will start to level out. At this point, I'd sell half of the shares to lock in the profit (~5% gain). I'd keep the rest for the next day, if the stock closes lower than open price then it shows weakness, I'd get out and never look at it again. If it's higher, I'd keep it for 2-3 more days.
With this strategy I was able to make a lot more than my day job. There used to be 7-8 IPOs every week, and a couple of those are hot so I was able to test this strategy for awhile. There were weeks that I made 20% on a position just over a few days (if I remember correctly the IPO was STV). There haven't been a lot IPOs since then and I haven't followed the market lately. May be it's time to start watching again.
I don't have these types of accounts so I never get pre-IPO allocation, but what I did on IPO day was continuously refreshing the page to catch when it's first open (IPO usually open b/w 10am-12:00). You can almost always buy at lower price than the offer price within the first 15 minutes. Most IPOs (~80%) close lower than the offer price on the first day, and they continue to go down after that, you don't want to touch these. The remaining 20% are hot, and you know they're hot b/c the underwriters keep bumping the offer price up. I only played these and for very short term, from only a few minutes to a few days.
I'd time when the price starts bouncing back after the first 15 minutes, probably b/c more people realizing the stock is opened to the public and buy in, and buy 300-400 shares. After about 20 minutes of insane rising, the price will start to level out. At this point, I'd sell half of the shares to lock in the profit (~5% gain). I'd keep the rest for the next day, if the stock closes lower than open price then it shows weakness, I'd get out and never look at it again. If it's higher, I'd keep it for 2-3 more days.
With this strategy I was able to make a lot more than my day job. There used to be 7-8 IPOs every week, and a couple of those are hot so I was able to test this strategy for awhile. There were weeks that I made 20% on a position just over a few days (if I remember correctly the IPO was STV). There haven't been a lot IPOs since then and I haven't followed the market lately. May be it's time to start watching again.
The rule is: if you can buy it, then you don't want to.
The only time they will sell in small quantities is if they can't sell it anywhere else. And if they can't sell it, then you don't want it.
The only realistic way to get in on them is a mutual fund that specializes in them. Or have a lot of money.
This is bringing back a lot of memories of 2001 when this kind of stuff was very very hot. I wonder if that IPO mutual fund still exists.
Also google witcapital - they would buy IPOs then sell them to individuals. As I recall they had a very hard time finding shares. It reached the point that social pressure would force companies to sell at least some to witcapital if they wanted their users to like them.
The only time they will sell in small quantities is if they can't sell it anywhere else. And if they can't sell it, then you don't want it.
The only realistic way to get in on them is a mutual fund that specializes in them. Or have a lot of money.
This is bringing back a lot of memories of 2001 when this kind of stuff was very very hot. I wonder if that IPO mutual fund still exists.
Also google witcapital - they would buy IPOs then sell them to individuals. As I recall they had a very hard time finding shares. It reached the point that social pressure would force companies to sell at least some to witcapital if they wanted their users to like them.
Not quite: If you have a retail brokerage account you could have put an order in to purchase TSLA anytime this morning when the price was between $18-$20.
Except you would not have gotten the 40% pop that IPO investors received.
It's more complicated than that.
When you buy an IPO you have a gentlemens agreement not to sell. (They can't enforce it, but if you violate it you will never get IPO shares again.)
The IPO broker will carefully trickle out shares to the market to make sure of that 40% pop on the first day.
They don't want to release too few or there won't be enough of a market, plus the price will go too high. Too many and the price goes down.
So you don't really get that 40% pop, you have to wait for a more long term price to see how you did.
When you buy an IPO you have a gentlemens agreement not to sell. (They can't enforce it, but if you violate it you will never get IPO shares again.)
The IPO broker will carefully trickle out shares to the market to make sure of that 40% pop on the first day.
They don't want to release too few or there won't be enough of a market, plus the price will go too high. Too many and the price goes down.
So you don't really get that 40% pop, you have to wait for a more long term price to see how you did.
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didn't Tesla just get screwed out of a whole bunch of capital?
I wonder about this as well. Perhaps one of the metrics companies should use when evaluating investment banks is how accurately they price IPOs.
There may be some other intangible value to having the stock jump on the first day. If so, that value had better be larger than <IPO amount> * <% increase> .
I wonder about this as well. Perhaps one of the metrics companies should use when evaluating investment banks is how accurately they price IPOs.
There may be some other intangible value to having the stock jump on the first day. If so, that value had better be larger than <IPO amount> * <% increase> .
An IPO that doesn't go up is considered a failure. So yes, it's basically required to jump at least that much on the first day.
That's why the company only sells a small amount of their shares at the IPO. The rest are sold slowly over time at more accurate price levels.
That's why the company only sells a small amount of their shares at the IPO. The rest are sold slowly over time at more accurate price levels.
For the IPO process, at least in Canada, the 1st sale of stocks are already spoken for - basically, there wouldn't be an IPO unless a certain threshold of institutions wanting to purchase blocks of the stock has been secured.
What you see on the stock market is actually 2nd hand selling and buying. It is near impossible to secure a block of IPO stock unless you are an institution, or represent someone with enough assets to get the brokers' attention.
What you see on the stock market is actually 2nd hand selling and buying. It is near impossible to secure a block of IPO stock unless you are an institution, or represent someone with enough assets to get the brokers' attention.
short answer: be rich and/or very well connected
They don't always go up. They try very hard to set the price a bit low to make sure it goes up.
I unfortunately bought (a few years ago) an IPO that went down the moment it traded. In hindsight the fact that I was invited to buy it should have warned me off.
I unfortunately bought (a few years ago) an IPO that went down the moment it traded. In hindsight the fact that I was invited to buy it should have warned me off.
I had an order filled by Fidelity at $18 this morning.
I issued an order but through my German broker. Probably won't profit fully of this first day, will have to wait till tomorrow to see.
I purchased this morning, after it went public, at $17.97 and was pretty happy with the results: +31.60%
I'm curious to see if tomorrow's early sell-off has a major impact on where the stock stabilizes.
EDIT: Removed actual dollar amount, no need to show that...
I'm curious to see if tomorrow's early sell-off has a major impact on where the stock stabilizes.
EDIT: Removed actual dollar amount, no need to show that...
I bought some today and am up about 32%. I wonder what it will be next week.
I bought on the market.
Remember the story about what you could have bought if you had invested such and such amount in apple stock in 2001?
Maybe one day I can buy one of these with the measly investment I made today. Or maybe my grandchildren.
Maybe one day I can buy one of these with the measly investment I made today. Or maybe my grandchildren.
It doesn't seem to show a market cap or number of issued shares. Does anyone here know either of those numbers?
The prospectus talks about floating 100 M$. It is also an interesting read, at least in parts. Especially the risks section.
http://www.sec.gov/Archives/edgar/data/1318605/0001193125100...
http://www.sec.gov/Archives/edgar/data/1318605/0001193125100...
From yesterday's article; 1.5b market cap and 13.3 million shares.
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Does anyone know if they declare the exact day of the IPO adhead of time? I knew the IPO was this week, but had a hard time figuring out what day for some reason. Either way I just got in at $24, lets hope this puppy still has some go in it.
I got 5 shares as an experiment. I managed to get in on the low end, so they're doing quite well. Day 2 was looking up early this afternoon, but right now it's dipping below today's opening (but still up). This was my first stock purchase, and really more of a "why not?" kind of thing for me. Just wish I'd had a bit more capital. Probably could have made a small fortune. :)
Yes, it was publicly known that the IPO was today.
I don't even know exactly what they are making, except really expensive electric cars. Are they working on cheaper electric cars, too? What are they doing that other car makers can't do?
Yes. Making the Roadster was, according to the founders, a move to compensate for the "weak" and inferior image electric cars currently have, before they start making them for mass market.
somewhat related: am I the only one who would love to see Elon Musk and Dean Kamen get together, pool their brains and money, and make something like the Iron Man suit?
Considering how badly the stock market did today, that's pretty impressive!
I saw a Tesla roadster in Toronto today.
That's my Tesla IPO Day 1 story.
That's my Tesla IPO Day 1 story.
Why did they not IPO at a higher price in the first place?