There was very little opportunity to sell at a price higher than 49 today. Anyone who bought expecting a profit in a few days will be disappointed. All they need is a little patience. All that small lot buyers got from UBS or the other underwriters was a small concession to the price yesterday plus brokerage fees.
No. No. I didn't read the offering memo. But that sounds like crazy talk. The is risk in any offering. That's part of the game. The underwriters will suport the stock at $49 after the offering. That's also part of the game. The overallotment is to sell more shares at $49 if it's over subscribed. Which I suspect it will be. (marketmonkey)
I disagree, I think you are being naive. While true that some times over-allotment shares are used for an oversubscribed security, it is almost always an IPO.
The other thing it is used for is by the underwriter to help them "stabalize" the stock. I think this is definitely the case in this instance. The underwriter and co-managers take a short position, if the stock goes down they use the over-allotment to cover.
Here is a definition:
"Green Shoe Option"
A green shoe option is a clause contained in the underwriting agreement of an initial public offering (IPO). The green shoe option, which is also often referred to as an over-allotment provision, allows the underwriting syndicate to buy up to an additional 15% of the shares at the offering price if public demand for the shares exceeds expectations and the stock trades above its offering price.
The green shoe option provides extra incentive for the underwriters of a new stock offering. In addition, these investment banks, brokerages and other financing parties also often exercise the green shoe option to cover some of the short position they may have created in an effort to maintain a stable market after a stock begins to trade, as well as to meet aftermarket demand.
From the volume today and the tight range I would say that maybe some institutions are selling their shares at the offering price or more or less to other institutions that might not have been on the list, taking profits on their earlier share positions in anticipation of getting more in the new offering at a higher basis.
Those indstitutions that sold now have a profit on the books as insurance when they take the new shares at the agreed price, which keeps investors in the fund happy. Worst case, they have a profit on the books to offset any loss they might take. The expectation is that the shares are a good long term investment even at the higher price.
>>I'm sure there's a clause which may adjust the price if the market price crops by a certain amount prior to the final delivery of shares. (boston)
>>That's what the over allotment shares are for.
No. No. I didn't read the offering memo. But that sounds like crazy talk. The is risk in any offering. That's part of the game. The underwriters will suport the stock at $49 after the offering. That's also part of the game. The overallotment is to sell more shares at $49 if it's over subscribed. Which I suspect it will be.
Dont you think that there a lot of unhappy new stockholders as the price starts to drop below
$49 with little support in sight? <<
There were probably some who got small allocations of stock that decided to sell rather than wait on news. One UBS customer here said he put in for 500 shares and got on y 100. But on the other hand, I am encouraged that over 3 millions shares have traded here and there were buyers very close to the secondary pricing.