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SBF
@SBF_FTX
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@SBF_FTX
7) But that doesn't mean they have to be *this* cheap. Part of the problem is that, prior to listing, no one really knows for sure what the company is worth, and so there's a lot of uncertainty. And in an uncertain market with a restricted set of buyers, they can bid cheap.
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SBF
@SBF_FTX
8) So banks live off the confusion and make money buying into an IPO and selling on listing. The 'oracle price' they're using is essentially an auction with only a few possible sellers; not a very efficient reference!
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SBF
@SBF_FTX
9) It's not the only way companies raise money. (i) Sometimes they use a SPAC -- which gives more flexibility and more potential ultimate buyers than an IPO, though still not a ton. (ii) Or, better yet, they can go to every venture fund in the world and negotiate a sale price!
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SBF
@SBF_FTX
10) The more open the access is, they more fair of a price they'll get, because the more robust the pricing mechanism. (iii) They could try to find a way to let in *any* investor, no matter how big or small, and have an auction -- this is how some crypto IEOs work.
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SBF
@SBF_FTX
11) (iv) Or, there could be an open and liquid orderbook--a market on an exchange; the world's most efficient pricing tool. And that's what would probably get the company the fairest price. That's close to what the SEC just allowed--though there are some restrictions.
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SBF
@SBF_FTX
13) But if you're AirBNB, and you see your stock trading at $95 on FTX, maybe you ask for a higher IPO price than $50; or maybe you opt for a direct listing if you could get it. Well, they didn't--they sold in the IPO. But now think about Coinbase.
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SBF
@SBF_FTX
16) That's the power of orderbooks: they're the general purpose tool for people to each express their opinions on a value. They're one of the world's best oracles, when used right. And they say that maybe people will pay more for Coinbase than a single bank's bid.
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