How do investors other then company owners make big money off an IPO?
So you have IPOs such as Twitter where investors outside of Twitter owners/employees are poised to make big money. How is this?
How did those other investors get the chance to participate in the IPO and typically how much less are they buying their shares for than the IPO price will be?
Before an IPO, the company is private. Typically the stock is privately traded, you can contact investor relations (no offense but I doubt you have that 8 figure money). Or look at investment banks but you might as well see if they can get you Twitter stock before opening an account, which typically have a minimum size of $5-10 million. Or invest in publicly traded stocks that hold Twitter. GSVC has ~14% of it's NAV in Twitter, not really much at all. Go long some March 14 $20 calls, maybe. But you'd have to hope Twitter goes up more than FB drops, and all the other junk doesn't counterbalance Twitter's gains, and that the volatility doesn't decrease on GSVC. And that Twitter doesn't have any bad news before the IPO, like having to lower the offering price, or that it's undersubscribed.
(disclaimer: this isn't investment advice)
Where should I look to see which funds hold what in what percentages?
Honestly it's mostly scattered, I've only found them from blogs writing about this.
GSVC http://investorplace.com/ipo-playbook/twitter-ipo-gsvc-twitter-s-1/ SVVC: http://www.marketwatch.com/story/firsthand-technology-value-fund-disclo…
Goldman is the lead underwriter, so maybe they'll give their clients an opportunity to buy shares pre-IPO (they did this with Facebook, but I realize trailing data is fairly useless). http://www.reuters.com/article/2013/09/13/us-twitter-ipo-banks-idUSBRE9…
I think undertheblam was asking how to get in pre-IPO, but getting in on the IPO is probably just as good (TWTR could gap up high from the IPO price, who knows).
@undertheblam, people get in pre-IPO by contacting Twitter's Investor Relations, or talking with their investment banker. You have to have a lot of money to do this, as I explained in my previous post. The typical retail investor won't get in pre-IPO. The earlier you get in, the lower the price (generally). I'm not sure how much lower Twitter is currently, but it's probably within 10% of the IPO price. If you're looking for arbitrage, the day before the IPO announcement would've been the time to get in.
I don't have any contacts in IB, but if anyone does feel free to chime in.
Definitely answers some questions for me.
I get emails all the time from a bank that does my employers offerings. They aren't for fancy Twitter's or Tumblr's or anything, but it's still an offer to buy into IPO's. So that's another way (to get in an IPO, not necessarily to hit the moneypot)
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