The Kardashian IPO Effect

The World Cup game today is sold out.  Has been for months.  But if Kim Kardashian wanted to attend, there would be a ticket for her.  And for her entourage. Good seats, too.

Which sums up the IPO market.  GOPRO becomes a public company today, offering shares at 24.  We expect it to finish the day above 30.

When a company hires an underwriter to place a public offering, the underwriter largely determines the offering price.  When that is decided, the underwriters allocate the shares, mostly to favored customers, otherwise known as Big Money.  Because this creates an artificial demand among the general investing public, a frency commences as the nonfavored bid for shares, too often at the "get me some at any price" level.

This creates a pleasant market for the underwriter and for the client company but because there is artificial bloat on the share price, it sucks capital out of the markets.  Obviously, an investor telling his broker to get shares at any cost is not allocating capital to other established issues.

So if you wanted shares of Gopro at the offering price of 24, your broker may have tried but mostly likely came up short.  If you then went into the first aftermarket and bought the bid-up price, the chances of disappointment are high.