Agora, a China and US-based API company for real-time engagement, rose sharply after the IPO today.
Yesterday, Agora valued 17.5 million shares at a price of $ 20 a share, from its target range of $ 16 to $ 18 a share. The company raised $ 350 on its debut, or about ten times its sales in the first quarter of 2020, and is now well capitalized and has an airstrip forever given its modest cash usage as a continuing problem.
Although the debut was a success, it wasn̵
Let me translate Gurley is annoyed – at least to some extent rightly so – that the company’s IPO at the opening of Agora was terrible at $ 45 a share. By that we mean the company should sold their IPO shares not at $ 20, but at $ 45, the value at which the market quickly revalued them.
With $ 45 more than double $ 20, bankers “more than missed [their] original guess. “Given the number of shares the company has sold, the mispricing could go as high as $ 437.5 million!
This argument is valid, but it is not as complete a slam dunk as it may seem. Chat with CEOs of public companies and learn how important it is to have stable, long-term shareholders of their equity. The ones you meet on a road show, for example, and can invest in your IPO shares.
These groups – the long-term investors who tech people love so much – are probably a little more price-conscious than the momentum traders that are aiming upwards in recent debuts. That said, people tend to hold stocks for a shorter period of time.
So, if you want long-term shareholders, you may need to value your IPO below the price the market may initially pay after you start trading.
Still sacred Fuck $ 20 per share is not close to $ 45. Gurley is right.
A change may come. The Agora News is returning to what the NYSE is doing. It is trying to find a way for companies to create a direct list (just to start trading, without pricing or without raising capital) and to raise capital. This eliminates the problems that Gurley highlighted above. At least in theory.
If this model becomes possible and long-term investors are willing to pay for stocks in a slightly different way, the new method is obviously far superior to the old one for companies that are great. What Kind of Business Is Pops Burning the Most on Day One? I think it’s the most attractive or hyped company.
The companies that would do the most attractive IPOs would use the new method and – what? The detritus to go the old fashioned way? Signaling problems abound!
Anyway, it was a crazy first day for Agora.