IPOs Of The Smallest Companies Post Astonishing Failure Rates, But Bankers Still Win

  • 📰 Forbes
  • ⏱ Reading Time:
  • 67 sec. here
  • 3 min. at publisher
  • 📊 Quality Score:
  • News: 30%
  • Publisher: 53%

Business News News

Business Business Latest News,Business Business Headlines

I'm a graduate of the University of Miami. Before joining Forbes I worked as a reporter and editor at Bloomberg where I covered everything from sports to how negative rates impacted the Black-Scholes model.

executives at Bay Area broadband company Actelis Networks felt a hankering to go public. They fixed their eyes on the Nasdaq prize. But there was a snag: their stock, restricted to employees and early investors,What happened next is a textbook case, according to new research on microcap companies, defined as having less than $300 million in stock value, and their initial public offerings.

What was a gold mine for the bankers turned out to be the shaft for the retail investors. Fast-forward a week, and Actelis’ stock took a 37% nosedive, perhaps aided by a mad dash to cash in on those warrants while they were hot. Today, 17 months later, Actelis trades at about a dollar a share, down 95% from the initial first-day $24 close. The company didn’t respond to requests for comment.

The merits of having the big guns buy your stock are stark after a company spends time trading on OTC Markets, which is less formal, has no middleman and carries with it a reputation for being edgy. Retail investors, the kind who trade at home, account for about. They can be a fickle bunch, often swayed by short-term hiccups, a report on social media or the financial flavor of the week, making them more of a wild card for companies trying to maintain steady stock values.

Flip the page and look at a comparable group of stocks, at least in size, like the iShares MicroCap ETF, where 45% of shares are held by heavyweight investors. Clearly, just being on an exchange isn’t enough to entice the heavy hitters.“You know these aren’t being offered to institutional investors or to buy-and-hold retail,” Paltrowitz told. “They’re being sold to, in essence, unregistered stock flippers who see these deals coming.

 

Thank you for your comment. Your comment will be published after being reviewed.
Please try again later.
We have summarized this news so that you can read it quickly. If you are interested in the news, you can read the full text here. Read more:

 /  🏆 394. in BUSİNESS

Business Business Latest News, Business Business Headlines

Similar News:You can also read news stories similar to this one that we have collected from other news sources.

These companies reporting in the week ahead have a history of beating estimates and risingWatch these names for an earnings beat that could propel shares higher.
Source: CNBC - 🏆 12. / 72 Read more »

These Companies Are Being Squeezed by Higher RatesSurging interest expenses are wiping out profits for some issuers of risky loans
Source: WSJ - 🏆 98. / 63 Read more »

US companies increasingly eliminate college degrees as a requirement amid ‘out-of-control’ school costsU.S. businesses such as Walmart, IBM and Google are eliminating college degree requirements for some corporate roles as companies put more emphasis on skills.
Source: FoxNews - 🏆 9. / 87 Read more »

How China’s EV Boom Caught Western Car Companies Asleep at the WheelAuto execs in the US, Europe, and Japan never thought Chinese EVs were a threat. Now they're coming to wipe the floor with their Western counterparts.
Source: WIREDBusiness - 🏆 68. / 68 Read more »

US companies increasingly eliminate college degrees as requirement amid 'out-of-control' school costs'If you are going to work for a tech company, what's more important? A college degree or practical experience that you can code,' one entrepreneur said.
Source: FOX29philly - 🏆 570. / 51 Read more »