IPO lockups

Jordan Hayes jmhayes at j-o-r-d-a-n.com
Wed Mar 22 09:49:41 PST 2000



> The abnormal return is much more pronounced when the firm is
> venture financed, and we find that venture funds sell more
> aggressively than other pre-IPO shareholders.

The tone of this statement is inflamatory; isn't this as it should be? Venture funds cash out after the IPO because that's what they do: take companies from formation to the public. Once they do that, they return the invested capital to the fund members, typically so that they cycle can repeat. If that means an aggregate "permanent" 1.8% drop in returns, isn't that a small price to pay for the typically two to three orders of magnitude change in valuation over the lifetime of the investment? Those shares that the venture community dump are snapped up by longer-term investors in the company, typically institutions.

/jordan



More information about the lbo-talk mailing list