4

There are lots of news for $BABA. It's current price as shown in the market is $68 but my broker put an announcement saying that its limit price is already $85. Then who are the sellers? The company itself or the institutional holders?

If all people are willing to pay a much higher price, will the initial price "68" be only just a meaningless number?

1
  • 2
    No it isn't. People who have applied in the IPO will be alloted shares for that price. Only in the secondary market will you have to pay $85, as people are expecting the share price to rise.. Wait till it is listed and then buy in the market, which might be more than $85 but maybe less also.
    – DumbCoder
    Sep 19 '14 at 13:17
2

In an IPO the seller is the Company selling new shares. Some of the IPOs also include something called "secondary" sales which are existing holders selling at the same time at the IPO price. But that is a but more unusual.

And as someone noted, the $68 is the price paid for the people who bought at the IPO (the aggregate group usually called the syndicate). The $85 is the price that it is trading at once there is trading in the open market.

People that are able to get into the syndicate to buy the stock at $68 sometimes quickly sell if the price is much higher when trading starts. This is called "flipping" the stock. Hedge funds do this much more often than institutional buyers like Fidelity.

2

Usually the big institution that "floats" the stock on the market is the one to offer it to you. The IPO company doesn't sell the stock itself, the big investment bank does it for them.

IPO's shareholders/employees are generally not allowed to sell their shares at the IPO until some time passes. Then you usually see the sleuth of selling.

1
  • Actually, in case of BABA, the founder sold quite a lot of stocks in the IPO.
    – littleadv
    Sep 19 '14 at 19:04

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.