As tech companies grow they often need more money. They raise this money from rich investors and venture capital firms.
They raise the money in what’s called “rounds.” The idea is that each round values the company higher. This makes the investors feel good since they are now increasingly “rich” — even though they usually can’t sell their shares until the company goes public — the final round, which is usually handled by one of the biggies, like Goldman Sachs or Morgan, etc.
Sometimes a shareholder gets antsy and wants to sell just before the IPO — perhaps because they have a feeling that the IPO may be “down round” or be priced less than the last round of money raising. Sometimes the company needs money.
Selling shares before the imminent IPO can happen because of many reasons — because the company’s growth is slowing down, or the appetite for those type of stocks (fintech, energy, etc.) may have evaporated — as has happened with tech stocks since Fall of last year.
At some stage in your exciting investment career you will receive a breathless call from a broker (not your normal one) peddling you shares in a tech or fintech company about to go public.
This is unusual since IPO pricing usually represents a big bump in valuation. And you’d be stupid to sell your shares a few months before IPO — especially since you’ve owned the shares for years and waited and waited for your eventually grand “Liquidity Event.”
I bought some shares in Robinhood. On July 28, 2021, Robinhood priced 55 million shares at $38 a share, raising $2.1 billion. But the pricing came in at the low end of its expected range. The stock closed the first day’s trading at $34.82, more than 8% below the IPO price. Today it’s trading at around $13.60. I dumped the shares quickly, but still lost money. I was locked up for six months.
Lately I’ve been offered shares in Stripe. It’s a good company, but the various up-money raising rounds have lifted the valuation of the company way into the ionosphere. Billions and billions.
In short, be wary of buying stocks just before they go public
Flying tips
+ The safest way to get on Internet Wi-Fi is to use the Personal Hotspot on your phone. Airport Wi-Fi is fine for surfing, but for not for money transactions — like bank accounts or checking your stocks. Too many prying eyes.
+ The AC outlet at your seat often doesn’t work. Jiggling your plug may help. Only “may.” My suggestion is bring your own heavy external battery. Amazon has millions of them.
+ There are no pillows or blankets on domestic flights any longer I bring a Duxiana Travel Pillow. Click here.
+ Don’t take polarized AC cords with you. They’re the cords with one prong thicker than the others. i.e.
You don’t want the squared off plug on the right, either. You want a round one.
+ Don’t bother getting an Uber into Manhattan from a New York Airport — JFK, La Guardia or Newark. You’ll order them, and wait half hour in freezing cold, while you eye the long line of nice, empty yellow taxis you could have got into the city faster, and maybe cheaper.
+ The best travel ear buds are these Bose:
They’re noise cancelling. They stay in your ears. They plug into airline sound systems, so you can watch a movie while you sleep. The case is tiny, slips in your pocket.
Noise cancelling means they shut out the aircraft’s engine sounds and suddenly it’s bliss. Buy them here.
+ Private jet and helicopter prices are all over the place — but generally going through the roof. Blade Helicopter quoted me $2,565 for a ride from Newark Airport to the west side of Manhattan. The taxi was less than $100. Private jet prices are affected by huge “membership” fees, which you have to pay before you pay for your trip.
I love fintech
On a recent Alaska Airlines flight they pushed their branded Visa card. The major benefits was a free companion flight to the moon (or wherever).
I filled in the form the nice stewardess gave me.
Three weeks later Bank of America rejected my application.
Two days later a brand new BofA/Alaska Airlines Visa card arrived in the mail.
I asked them to increase my credit line so I could afford a taxi to the airport.
Three weeks later they refused, saying I was too-new a BofA customer.
Two days later I received a second BofA Visa card.
I guess that means they doubled my credit line!
Oh, by the way, all my credit records are locked. TransUnion, Experian, Equifax.
So Bank of America gave me two credit cards without knowing if I’m a pauper or a rich man.
Ain’t America great?
Covid is still around. Please be careful.
+Several of my friends have caught it. They’re not enjoying their misery.
+ My book says pizza is the worst — far worse than hamburgers.
+ My brilliant daughter -in-law, Anne, turned me onto this:
It really takes only a minute and tastes great with some blueberries and warm milk.
Silly medical cartoons
Ukraine still needs your help
Here’s your motivation. He looks like the psychopath he really is.
There are now over four million Ukrainian refugees. They need to be fed.
I just gave more money to World Central Kitchen, a huge provider of meals.
Please give them money — $500? Click here.
I’ll be back tomorrow. Promise. — Harry Newton
