The Facebook Green Shoe and $38 Support Explained

This is kinda a fake post, which is to say, I’m going to send you to someone else who already wrote an excellent post on the subject.   I sent out this link on Twitter last night and I’ve never seen so many people “favorite” a Tweet of mine before – which of course isn’t a testament to my Tweet-tastic skills, it’s a testament to the quality of the article in the link, which is from Matt Levine @ Dealbreaker.  So, since I know that not all of my blog readers follow me on Twitter (why not?), I’m repeating the “forwarding” here:   go read Matt Levine’s explanation of IPO mechanics and you’ll understand why there was $38 support in Facebook on the day of its IPO, why that support may fade next week, and why it’s not “manipulation.”

Snippet:

“Morgan Stanley et al. sold 484mm shares for $38.00 last night, but only bought 421mm from Facebook. That left them with a 63mm short that they were hoping to cover at $37.582 (the price of the IPO and greenshoe to them) but that it sure looks like they’ve mostly covered at $38.00 – $38.01 today.”

Matt Levine: Facebook IPO Goes Nowhere in Exciting Fashion

-KD

disclosure: no positions in $FB

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