I like Matt Levine’s dry take on Facebook’s secondary offering: “Whatever else you think of Facebook,” he writes, “it is unusual among public companies in its desire and ability to sell stock at local maximums.” And really, he’s right: it makes perfect sense for a company (and its controlling shareholder) to sell stock when demand is greatest and the price is at its highest. After all, share sales are a simple transaction: you give me a one-off slug of cash today, and in return I’ll give you ownership rights in perpetuity. Anybody engaging in such a deal should at least want to maximize the amount of cash they’re getting, which is another way of saying that you should only sell stock if you think it’s overvalued.
Matt Yglesias presents the case against dividends today — and it’s a case I’m sympathetic to. But before you can determine whether stocks should be paying dividends, it’s important to understand why stocks are paying these dividends. And the answer is in the chart above.
Twitter is about to raise more than $2 billion, on a valuation of more than $18 billion, in its IPO. At some point on Thursday morning, an opening price for the stock will be set — a price which will almost certainly be north of the official IPO price of $26 per share — and after that, it’s off to the races. Will Twitter stock go up? Will it go down? Is it a buy? Is it a sell? Is the company worth what the market says it’s worth? It’s a pretty silly game to play, at heart, since no one has a clue what the answers are, not even Twitter’s underwriters, who had to raise the valuation of the company twice.
Have you heard about the global wine shortage? Of course you have: it’s been covered in pretty much every media outlet imaginable, but Roberto Ferdman’s piece for Quartz (“A global wine shortage could soon be upon us”) was one of the first, and also one of the most detailed. Still, it was the classic single-source article: it basically took one Morgan Stanley report, reproduced a bunch of the key charts, and added a clickbaity headline.
I’m very glad that the WSJ has published today’s debate between Farhad Manjoo and Dennis Berman on the subject of Apple. Manjoo has been writing some very insightful columns about the company, including the one yesterday which explained that Apple has many better options, when it comes to spending its cash, than taking Carl Icahn’s advice and essentially mortgaging the entire pile to conduct a stock buyback.
When you look up the price of a stock on the Nasdaq stock exchange, you’re not really looking up the price at which it’s trading on that exchange. All of the Nasdaq stocks trade on dozens of exchanges, all of which have the right to trade in those stocks. That right is known in the market as unlisted trading privileges, or UTP. The job of the Nasdaq is to serve as the securities information processor, or SIP, for all those different exchanges: the exchanges report to the Nasdaq all of the information they have on bids and offers and trades, and then the Nasdaq aggregates all that information and presents it in one place. Most importantly, it shows the most recent price at which any given stock traded, on any exchange. That’s the price you’re looking at.