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market debut has set up its founders, employees, early backers and even
those who scored shares in the initial public offering Thursday night
for quite a windfall.
But not everyone who invested in the company is reaping the spoils.
Shares of the ride-hailing company
rose nearly 9 percent on Friday. At over $26 billion, Lyft’s market
value is almost double what private investors valued it at less than a
But Lyft’s first-day gain is measured off the I.P.O. price (which was set on Thursday, when shares were divided up mostly among large funds). Ordinary investors who wanted in had to wait to buy the stock until it was available on public markets on Friday, and at a much higher price than the big funds paid.
And those who bought as soon as trading began are already sitting on losses of a little more than 11 percent.
It serves as an important reminder that amid all the hoopla around trading debuts, small investors wind up taking a lot of the risk. Most of the gains on the first day of trading for a stock are realized with the first trade.
Over the past decade, companies listing shares on American stock exchanges have increased 14 percent from their I.P.O. price, according to Dealogic. But nearly all of the rise has come at the opening trade.
That dynamic has
played out in many of the prominent I.P.O.s in recent years. Facebook
shares opened 10 percent higher on their first day of trading and then
proceeded to give back almost all those gains to finish essentially
unchanged for the day.
Etsy was an
extreme example of this. Its stock soared 94 percent on its first day of
trading, but investors who bought at the open actually lost 3 percent
by the close of trading.
And it’s not
just tech companies. Levi Strauss recently made its return to the
public markets, selling shares to investors at $17 a piece on March 20.
The stock opened the next day at $22.22, a 31 percent jump. For the rest
of trading that day, though, it climbed less than 1 percent.
course, if Lyft keeps growing as fast as Wall Street hopes it will, or
works out how to turn a profit, then even the latecomers could wind up
with respectable returns. Facebook shares are up more than 300 percent
since their first day of trading, and after Etsy struggled for its first
three years as a public company, its shares have more than doubled
since they started trading.
not being able to buy at the I.P.O. price also greatly affects returns
over the next year. Investors who bought shares at the offering price
have averaged a 22 percent increase over the past decade. Returns for
those that bought at the open? Sixty percent less.
Samsung scored a win today, as Apple agreed in a court filing to pull its infringement claims against the Galaxy S III Mini. The device had been accused along with anassortment of other devices in the second legal battle the two companies are engaged in with Judge Lucy Koh. Apple had included the Galaxy S III Mini because it was available for sale through Amazon.com, but Samsung argued that the device had not been officially released in the United States, and therefore shouldn’t be covered. Predicated upon Samsung’s word that the company was not selling the phone directly in the US, Apple agreed to drop it from the list of accused devices. It’s important to note that this kind of jostling is common at this stage of the game, with both companies ironing out which devices will be included in the pending trial. That said, the Mini isn’t clear just yet — Apple may still be able to include the device if Samsung reverses its stance and decides to sell the phone domestically.