The following decade does add the amusing perspective that the "undervalued" shares were worthless a couple of years later. I wonder if they can dredge up documents finding that Goldman Sachs was aware that its grotesque undervaluation with respect to the market demand it was fuelling was simultaneously a grotesque overvaluation with respect to eToys' fundamentals. It would be funny if they tried to use "worried about the long term potential" as a defence.
I guarantee that if you look hard, you can find either an analyst or trader at GS who thought both of these things. That's because GS is a large bank full of many divisions, quite a few of whom are chinese walled from each other. (Admittedly, some of the chinese walling has happened in past 10 years...)
Banks are fragmented and individual portions of the bank don't always agree with each other.
Fun fact: a certain large bank (I won't say which one) is spending ~$10-90M on an internal matching engine. This is because they spend millions on unnecessary transaction costs - trader A wants to go long and trader B wants to go short, both of them hit the public markets rather than simply trading with each other.
Quite right, and a weakness of the original article is it doesn't make it clear how closely connected the "sales representatives" clamouring for repeat business were to the original IPO.
I'm intrigued by the possibility that an individual person closely connected with pricing the IPO might have expressed a view akin to: "we've got to set a sub-market price to ensure our institutional investors make a killing on the first day, because this stock will be in trouble once the hype dies down"
But still, that was over a decade ago, and I'm sure no investment banker would ever be so cynical today...
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The following decade does add the amusing perspective that the "undervalued" shares were worthless a couple of years later. I wonder if they can dredge up documents finding that Goldman Sachs was aware that its grotesque undervaluation with respect to the market demand it was fuelling was simultaneously a grotesque overvaluation with respect to eToys' fundamentals. It would be funny if they tried to use "worried about the long term potential" as a defence.
I guarantee that if you look hard, you can find either an analyst or trader at GS who thought both of these things. That's because GS is a large bank full of many divisions, quite a few of whom are chinese walled from each other. (Admittedly, some of the chinese walling has happened in past 10 years...)
Banks are fragmented and individual portions of the bank don't always agree with each other.
Fun fact: a certain large bank (I won't say which one) is spending ~$10-90M on an internal matching engine. This is because they spend millions on unnecessary transaction costs - trader A wants to go long and trader B wants to go short, both of them hit the public markets rather than simply trading with each other.
Quite right, and a weakness of the original article is it doesn't make it clear how closely connected the "sales representatives" clamouring for repeat business were to the original IPO.
I'm intrigued by the possibility that an individual person closely connected with pricing the IPO might have expressed a view akin to: "we've got to set a sub-market price to ensure our institutional investors make a killing on the first day, because this stock will be in trouble once the hype dies down"
But still, that was over a decade ago, and I'm sure no investment banker would ever be so cynical today...