How to Steal an IPO
Those of you who’ve been reading my commentary for any length of time already know that I got my introduction to financial markets in the belly of the beast.
I spent the formative years of my career working for one of the biggest investment banks in the world: Morgan Stanley.
While I was there, Morgan was the book runner for countless IPOs, but the one that’s always stood out in my mind was that of Facebook.
We were in charge of pricing that IPO back in the earlier 2010s, and we told the insiders and private investors it was worth between $12 and $14 a share on the public markets.
But they refused to sell their company for less than $18 a share, so that’s where the IPO was priced. The banks running the books knew it wasn’t worth that much, but we also knew we could make sure it kept trading at least that high for the day.
You see, what happens when a company goes public through a traditional IPO is that the book runners, the banks in charge of selling the shares for the company, sell all those shares before they even hit the markets.
And then, while all the other public stocks in the country start trading at 9:30 a.m. EST, those IPO shares get traded back and forth on the primary market among massive institutional investors.
Once those investors, Morgan Stanley’s clients, have made a profit, the shares hit the secondary market and the rest of us get a shot at buying in.
But the thing is a lot of times the big profits are already taken by the investment banks’ clients.
Facebook’s debut has always stuck out in my head because I’m pretty sure it was my money the company used to keep the share price high. Right around that time, the company took our 401(k) match out of the funds we’d elected it go into and put it all into a company stock plan.
That likely freed up a few billion dollars the bank could then use to trade Facebook back and forth between accounts and keep that price up above the $18 IPO level.
Now, it’s worked out well for me in the long run since we got into that company stock back when it was trading for around $10 a share. And it’s up at $64 now. But at the time, I wasn’t really thrilled that the company had borrowed my money to help Mark Zuckerberg.
And it gave me a very clear inside view of the value of investing in IPOs.
This week, watching a couple of IPOs skyrocket gave me a refresher on how the big banks and institutional investors can steal an IPO from us retail investors...
DASH-ing Your Dreams of Gains
On Wednesday, December 9, DoorDash, the delivery-app company, held its IPO. If you'd looked at the gain by the end of the day’s trading, you’d think it went incredibly well. The IPO shares were priced at $102 and closed around $189 for an 85% gain.
But then you’d start looking at the timestamps on the trades, and you’d realize who actually did well and who got screwed. Hint: Morgan Stanley did not get screwed.
While almost every other stock on the NYSE started trading at 9:30 a.m. that day, DoorDash shares weren’t available to retail investors until around 12:42 that afternoon, and they started trading at $182.
Hmmmmm... that cuts the first day’s gain down to 4%.
Before you could even get one share of DoorDash’s newly public stock, the investment banks’ clients made a 78% gain in just a few hours.
They’d stolen the IPO once again.
Same Day, Same Story
But that wasn’t even the biggest theft of the day. That belongs to C3.ai, which went public the same day at a starting price of $42.
It closed the day up at $92.49 for a first-day gain of 120%! Not bad until you see how much retail investors made...
You see, those shares didn’t hit the open market until around noon also. By the time they did, they were trading for $100 apiece.
So the investment bank clients bought and sold in one day and made about 138%. The retail investors who bought the first shares available ended the day with a 7.5% loss.
Again, the investment banks stole the IPO, and retail investors got the short end of the stick.
That brings me to my point, which is more of a question: If there are so many people with so much money working against you, why invest in public stocks at all?
Well, until recently, the answer was, “That’s the best of all the worst places to put my money.” And that was a good answer. At least stocks can beat inflation. Bank accounts sure can’t.
But things are always changing and evolving in the investing world, and now there’s a better way for retail investors to grow their money.
It keeps the investment banks, like Morgan Stanley and Goldman Sachs, from stealing any more IPOs from you. In fact, it gets them in your corner making sure you make the biggest profits possible.
Insiders ALWAYS Win
Before I get into that, I just want to talk a little about the people who got to exit on Wednesday with DoorDash’s IPO... because they were the really big winners.
This past June, DoorDash held one last fundraising round. It brought in about $400 million from massive investors like Fidelity. Those institutional investors bought their shares at a price that valued the entire company at about $16 billion.
The IPO valued the company at about $39 billion. That means those investors, the last ones to come in, the ones that came in at the most expensive private price, made a 144% return before the shares even started trading.
By the end of the day, they were up 275%.
But they got in last, and they got the smallest profits from the IPO. Unfortunately, the terms of the earliest rounds weren’t disclosed, so I can only guess how much the seed and angel investors made.
But I can tell you that the investors who got in back in March 2016 made 5,471% gains when the shares started trading on the primary market. They were up 8,471% by the end of the day’s trading.
And I can tell you that the investors who bought DoorDash in March 2015 were looking at a 6,400% profit from the IPO and a 9,900% profit by the end of the first day’s trading.
It even makes the near double that institutional IPO investors made that morning seem like chump change, huh?
That’s how this game is played. The earlier you invest, the more you make. The later you invest, the more likely you’re going to be holding the bag and looking at a loss.
The lesson is this: If you really want to win at investing, you have to be investing where others can’t. You have to be investing in private companies that are going to go public.
Then you don’t have to worry about the investment banks stealing your IPO because they’ll be the ones championing it and pushing your shares on new investors.
Instead of watching their clients make all the money, you’ll be collecting all that money from all their clients.
But the thing is this market has been off-limits to all but the super-wealthy and incredibly well-connected for pretty much all of history.
It's just recently been made available to retail investors like us. And with any new industry, there’s a lot of fragmentation and a lot of complications.
That makes it both difficult to assess and a little scary — we humans are always a little nervous about new things.
That's why I’ve created an investment advisory service to help retail investors conquer the pre-IPO markets the same way I’ve been helping them beat Wall Street in the public markets.
Bringing the Bankers to YOU
You see, I’ve been investing in private companies for a while now. I was fortunate enough to make a good deal of money and a lot of connections working on Wall Street.
Those connections and that extra cash allowed me to make my first private investment as a friend of a company founder.
Now, thanks to those investments (and a little inheritance from my grandparents), I’m an accredited investor. That means I’m allowed to invest in any company that will take my money.
And while I’ve not completely given up on the stock market — I still have my IRA and 401(k) — most of my money goes into private investments now for the simple fact that they produce the best returns.
When my companies are ready, they call up my old employer, Morgan Stanley, and tell the bankers the terms they want for their IPO. The banks drum up the business for us, and we get to sell our shares to new investors on the public market.
We make an exit and typically a pretty large profit before the stocks even start trading. There’s no logging into your brokerage account every day stressing over the ups and downs of the market.
We invest, hold, exit, and repeat.
I want you to join us so you can be the ones that are making out like bandits before retail investors even get a shot at buying shares.
But before I let you in on how to join us, I want to talk a little more about the profits early investors make when their company goes public...
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When $1,000 = $16.8M
You’ve no doubt heard that Airbnb, the short-term rental company, is finally going public. It’s actually happening as I’m writing this article (I write a day in advance to give my editors ample time to correct any grammatical mistakes I make).
So I don’t know how Airbnb’s newly public shares have fared in the open market, but I do know that it’s already 11 a.m. here in Baltimore, and those shares haven’t appeared for sale in my broker’s system.
That means at least the first hour and a half of Airbnb’s public life has been spent being traded back and forth between massive investment funds.
And that should lead you to the understanding that any gains retail investors made yesterday on Airbnb’s IPO were paltry compared to what the investment banks’ clients made.
But I don’t even care how much those investors made because there’s no way that it even comes close to comparing to what Airbnb’s private investors walked with.
When Airbnb’s first investors came on board, the company was valued at about $2.5 million. When the company went public yesterday, it was priced for a $42 billion valuation.
Those earliest investors are walking away with a 1,679,900% profit! Can you even imagine that kind of gain?
It’s even tough for me, and I’ve been in this business for decades. But to help make it a little clearer, let me show you what a 1,679,900% win looks like:
That’s a chart of the valuations at different funding rounds leading up to the IPO. The line on the chart is the growth of $1,000 invested in the earliest round.
That $1,000 from the seed round was worth $16.8 million BEFORE the shares even hit the market for retail investors to buy.
A gain in the day’s trading is just icing on the cake for Airbnb’s early investors.
So, again, I ask: Why would you want to buy stocks that average a paltry 8% gain per year?
You’ve Got a Golden Ticket
If you’re looking at these private investor gains and thinking the same thing, I’ve got an opportunity for you to make a change that could completely alter you and your family’s future.
I mentioned earlier that I’ve founded an advisory service that’s focused on getting retail investors like you into private companies BEFORE they hold an IPO.
Well, now I want to give you a seat at the table, and I want to make you an offer so good I hope you can’t refuse...
I just started this service about a year ago and wasn’t able to open it to new investors until just this past summer. But we’ve already had our first private company go public, and we just about doubled our money when it did.
That's just a taste of what we’re expecting in the coming months and years. You see, we got in at the very last funding round before that company went public. So we got the highest private price.
It was still about half what public investors were willing to pay in the IPO, but it was far more than the earlier investors paid.
That's far from our only active investment, and it’s probably going to end up being one of our smallest gains.
That’s because we’re also getting the chance to be the very first investors in some of these companies.
We’ve helped fund an EV company recently and are getting the same terms Elon Musk got for his investment in Tesla back when it was just an idea.
We’ve funded a company building farming tech that’s going to lead to cleaner farms, healthier animals, and more prosperous communities.
And we recently invested in a private company that’s completely disrupting the growing cannabis industry.
That just a few of the investments we’ve made so far. There are far more coming in the new year.
In fact, I’m currently vetting a brand-new one. It’s a company that’s found a way to bring conservatives and liberals together over our Second Amendment rights. It has a growing community of customers, solid revenue flows, and support from both sides of the aisle in D.C.
We'll be among the very first to get the opportunity to invest in this company before it goes public.
So if you’re wondering why you’re still only investing in the public markets...
If you’re interested in adding some explosive ammunition to your investment arsenal...
If you’re tired of watching the big banks and super-wealthy investors steal all the IPOs...
But please, if you want to join us and take advantage of this incredibly profitable corner of the market, act quickly.
The services I’m providing are worth thousands of dollars a year, if not more. And I’ve gotten permission to offer a massive discount to any Wealth Daily member who joins us.
But like all sales, I can’t offer that price forever. Eventually, I’m going to be told I must charge what it’s really worth.
That means the next time you get this opportunity; I could be charging two or three thousand dollars a year for a membership. Honestly, I could be charging tens of thousands, and my old clients at Morgan Stanley would gladly pay it.
But I don’t want to help the rich get richer — I did that on Wall Street, and it’s not really all that rewarding.
I want to help people who really need my help. I want to help you.
So I’m offering a full year of my analysis and research, a full 12 months of pre-IPO investments, for less than what DoorDash’s shares cost at the end of their first day.
Just click here to view a presentation explaining the immense potential of these investments and how you can join us and start your own private portfolio TODAY.
Or you can read a report with the same information by clicking here.
Just make sure you don’t delay. Not only can I only offer this discount for a short time, but these kinds of investments fill up fast.
They’re not like public stocks. Once the round is closed, you’ll never get that opportunity again.
To your wealth,
After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter, and co-authors The Wealth Advisory income stock newsletter. He also contributes regularly to Wealth Daily. To learn more about Jason, click here.
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