🍋 IPO Flop Zone

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Happy Friday! McDonald’s broke its own app yesterday after it decided to sell the Egg McMuffin for 63 cents, in honor of its original price and 50th anniversary. The deal was too good to be true for many as the app went down shortly after announcement. The robots are taking over as Starbucks partnered with Amazon to launch its first cashier less cafe. In more wholesome news, Binance founder CZ, purchased his first home in Dubai after previously disclosing he didn’t own a house or car, things he considered “illiquid.” (pls don’t let this man near a boomer)

1. Story of the Day: IPO Flop Zone

Paytm, digital payments giant just completed India’s biggest-ever initial public offering. It also turned out to be one of the biggest IPO busts in recent history. The stock crashed 27% on its opening day of trading.

So what went wrong? The short answer is that founder Vijay Shekhar wanted to make it the country’s largest IPO and surpass long-standing IPO record set by Coal India in 2010. Now it just looks like failure from underwriting banks including Morgan Stanley.

Paytm stretched its valuation during the IPO process, underestimating the importance of actual demand for its shares. It priced shares at the top of the range. In early signs of trouble, the IPO wasn’t fully subscribed the first days that shares were offered – a rarity for deals in red-hot India.

Also, a moment of silence for retail investors who piled into the offering including global giants like Blackrock and Canada Pension Plan Investment Board.

Busted IPOs aren’t always indicators of the future. Facebook lost more than half its value in the months after its 2012 listing in New York. IPO investors who stuck with the company are now sitting on gains of nearly 800%.

Founder Sharma, who started the company with a $100k loan two decades ago also might be crying some tears of joy. He is worth a cool $2.5 billion from his 12% stake in the company.

Short Squeez Takeaway: That finance is an art and not a science, is perfectly showcased when pricing IPOs. Underwriters have small room for error, underprice it and leave money on the table, overprice it and suffer Paytm’s fate. In any case, maybe next time don’t price IPOs with emotion and use some of that art and/or science?

2. Markets Rundown

• US stocks closed mostly at records in a choppy Thursday session, driven by upbeat earnings from Nvidia and major retailers, while concerns about a seasonal rise in Covid cases were seen capping gains.

Movers & Shakers

• (+) Macy's ($M) +21% after third-quarter results beat estimates on the top and bottom lines.

• (+) Nvidia ($NVDA) +8% after the company beat earnings and sales expectations for the third quarter.

• (–) Cisco ($CSCO) -6% after issuing next quarter earnings guidance at the low end of estimates.

3. Top Reads

• If you own a pet you’ve heard of Chewy — here’s why the $31 billion site succeeded where Pets.com failed (BoB)

• Gemini raises $400 million to build a metaverse outside Facebook’s walled garden (Forbes)

• How HBO could have become — or bought — Netflix (Vox)

• Technology struggles to disrupt certain things (SpilledCoffee)

• The great resignation is great for low-paid workers (Bloomberg)

• Where Americans find meaning in life has changed over the past four years (PewResearch)

• Austria re-imposes a full Covid lockdown and makes vaccination mandatory (CNBC)

• Retirees spend a lot of time and money to buy their ‘forever home.’ Then they sell it (WSJ)

• Sierra Space raises $1.4 billion at $4.5 billion valuation as it builds spaceplane, space station (CNBC)

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4. Book of the Day

What do the $350 million Ford Motor Company disaster known as the Edsel, the fast and incredible rise of Xerox, and the unbelievable scandals at General Electric and Texas Gulf Sulphur have in common? Each is an example of how an iconic company was defined by a particular moment of fame or notoriety; these notable and fascinating accounts are as relevant today to understanding the intricacies of corporate life as they were when the events happened.

Stories about Wall Street are infused with drama and adventure and reveal the machinations and volatile nature of the world of finance. Longtime New Yorker contributor John Brooks’s insightful reportage is so full of personality and critical detail that whether he is looking at the astounding market crash of 1962, the collapse of a well-known brokerage firm, or the bold attempt by American bankers to save the British pound, one gets the sense that history repeats itself.

"If you’re not able to communicate successfully between yourself and yourself, how are you supposed to make it with the strangers outside?”

5. Short Squeez Picks

• Nvidia best stock to own 'for the rest of your life'

• Invest in the 🌍 you want. Subscribe to For What It’s Worth now: a 5-min free weekly newsletter on socially conscious investing

• Stephen Curry continues to make NBA 3-point history

6. Career Portal

We currently have 70+ roles curated for you on the Overheard on Wall Street Career Portal. From investment banking internships to private equity roles to strategy/development jobs in crypto. No more spammy jobs on LinkedIn and annoying emails from headhunters. Your one stop shop for finding a job.

If you are looking to hire a candidate and want to post a job, just click on "Hire Talent" button on the top right corner of the Career Portal.

7. Daily Visual: The Economic Rebound

Source: NYT

8. Daily Acumen: Incentives

The worst behavior resides in industries with the most extreme incentives. High-end art, where counterfeits proliferate. Finance, where scams are everywhere.

The question is not just whether immoral people are attracted to industries where there are big rewards for bad behavior, but also whether it's the industry itself that makes good people behave badly.

Incentives may be a drug in their ability to cloud your judgement and make you do things you would have never considered before.

Incentives and disincentives should be the very first thing you examine when trying to understand someone's behavior or thought process.

9. Memes of the Day