Can someone explain the IPO play from Industry season 2 episode 2?

I think this was the best episode of the series and probably the most realistic trading floor depiction I have ever seen in a TV show or movie. Now i want to know what actually happened because I don't completely understand the scenario most probably because there is too much  British lingo in dialogues. 

Why does Rishi has an exposure? Is it because Pierpoint is the lead runner of the IPO?

Was Harper able to identify Anna's funds position with regards to the IPO on basis of the FX trade? How realistic is that part?

Comments (12)

Aug 10, 2022 - 4:34pm
lawyermommy49, what's your opinion? Comment below:

I had the same questions about that play. I also was challenged by the lingo. But my main question was Harper's call to Anna. First- why did Harper know about Anna's Fx order - could she see it through the Pierpont system?  Then how did that call about the Fx trade at open lead her to know Anna intended to buy the stock in the secondary market when it began trading?  Anna didn't say that?  It seems like a big assumption by Harper to say Anna has to convert her cash first and she's doing that for the purpose of purchasing the stock in the secondary. 
 

help - what am I missing? 

Most Helpful
Aug 10, 2022 - 5:07pm
VickyP, what's your opinion? Comment below:

Don't exactly remember the specifics and was a couple of beers down so my explanation may not be 100% accurate but let me take a stab at it.

  1. Pierpoint was a part of the syndicate for the IPO. Don't remember if they were running lead or not but they were allocated a huge chunk to sell to the market (~3 billion if I remember correctly)
  1. Rishi as the head trader was in charge of trading the position out of his book (securities on his hand is risk on his hand and he wants to get out of this risk ASAP)
  1. The sales people are in charge of building the book and allocating the shares. They do this by gauging the market and effectively taking soft promises from certain funds/investors. In this case Felim was the big whale they were banking on to buy a major chunk of the book (this was all done leveraging Eric's relationship with him).
  1. Obviously, the relationship falls through and they have radio silence from Felim. Hence the panic that they may have to maintain this huge risk on their book and potentially lose out on a large windfall
  1. Harper basically then through some voodoo magic (it's unreal how stupidly lucky Harper is always) convinces Bloom to buy the position. The part about Anna buying is just assurance for him that a sector specialist is interested in the position as well.
  1. Harper figures out Anna's currency trade through bullshitting basically. The key point here is that Anna needs a certain currency to buy the IPO position (it was USD I believe?) and her fund is denominated in a different currency (Sterling or Euros, not sure about the semantics). The point being that Harper figured out Anna is exchanging the currency from pound/euro to dollar specifically to buy the IPO. In theory, she could be exchanging the currency to literally do anything else but given the circumstances, Harper took a bet.
  1. Another point to note. Not only did Bloom buy their entire position but also bought more from the market using Pierpoint as his broker which means more commissions and Harper becomes the rockstar.

This is my broken understanding of it. If you have any more questions let me know. I'll probably rewatch the episode to edit this answer and make it more refined and accurate.

Aug 10, 2022 - 7:28pm
COntangoCharlie, what's your opinion? Comment below:

I think you nailed it. I had to ask this question because even in a business school the stock sales process on trading day is not properly explained. Looking only at this episode i realized how brutal it is to work on a trading floor. And this situation also points out that there is still scope for humans to function even on equities desk.  Its probably the reason there are  equities execution jobs still available in market.

One good thing i noticed about season 2 is that Rishi is playing a bigger role....i just realized that in 1st episode he was angry at Harper because she was not bringing in any flow to the desk....In first season i saw him as a very confident trader who was not nervous at all when Adler came to axe people. 

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Aug 10, 2022 - 11:58pm
abacab, what's your opinion? Comment below:

Seemed like IPO happened a while back and they basically bought a big block from an insider / initial investor at a 3% discount who couldn't sell in open market or through directly marketed follow on. Selling that much at once would crush the stock. So they had to offload it to institutional investors and only way people would buy is if initial IPO investors with sector expertise (like Anna) would also buy. The spread was at that 3% but if it was a bigger discount to market price you take a loss (which stressed out Rishi). It's basically a privately placed secondary sale, although typically not common through a trading desk. 

Array
  • 3
Aug 11, 2022 - 9:17am
COntangoCharlie, what's your opinion? Comment below:

But i guess banks involved in syndicate get shares on discount to distribute it to public on par value....i might be wrong but i feel like i heard this in one of the lectures 

Aug 11, 2022 - 5:34pm
PrivateTechquity 🚀GME+BBBY🚀, what's your opinion? Comment below:

Is this show any good? I swore off finance shows after what they did to my boy Billions.  

Array

Aug 12, 2022 - 3:54am
K-Peezy, what's your opinion? Comment below:
PrivateTechquity 🚀GME🚀

Is this show any good? I swore off finance shows after what they did to my boy Billions.  

It's entertaining to me. Even if it's just for things like this thread where those of us who've actually been involved in IPOs and know how it really works get to dissect it and commit schadenfreude. I get that they have to "hollywood-ize" the topic to make it more palatable to a broader audience, but sometimes we like to watch intelligent shows instead.

Like for instance if they're doing the FX deal in order to facilitate the purchase in USD it'd mean that it would be listed on NYSE or NASDAQ (even if this block of shares is an ADR, which is another thing they fail to address) which would mean SEC filings that would dictate all the intricacies of who owned what blocks from the jump, the discounts applied, fees applied, etc (my contribution to the nitpick fest is coming from SEC/SEDAR/HMRC reporting).

And what they did to Billions is an absolute travesty. At least the first few seasons really were financially literate before they joined the "get woke, get broke" train.

  • 4
Aug 12, 2022 - 3:32am
anglosaxonchad, what's your opinion? Comment below:

Industry season 2 is out? Time to watch that hot middle eastern broad get pounded by the eton chad again.

Aug 12, 2022 - 1:15pm
Pulisic69, what's your opinion? Comment below:

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