Sunday, March 5, 2017

SNAP IPO Sign of Greed & Darkness

SNAP's IPO is a race to the top on greed.  Company founders gave new shareholders no voting rights.  A former Goldman Sachs co-chair said it was Wall Street's duty to ensure shareholders got a vote, implying Morgan Stanley and his former firm should not have underwritten the shares (source: Fortune).  Private equity underwriters (PEU) like The Carlyle Group did likewise but they had the decency to refer to IPO buyers as "unit holders." 

SNAP's IPO is also a race to the bottom on ethical business practices.  President Obama's JOBS Act aimed to reshape capital markets by lowering standards required to take a company public. Fortune reported

For certain companies with up to $1 billion in revenues (not a small firm by any measure), the act lessens the requirements now in place for financial statement audits, governance standards, and other controls. Provisions in the act also open the door to more conflicts in Wall Street research reports.
These moves not only aid Silicon Valley unicorns but PEUs seeking to flip affiliates.  A fall guy is required to capitalize on greed.  Will SNAP's eunuch shareholders make the fortunes they envision or end up bag holders conned by ballsy insiders?

Carlyle's unit holders are down 24% from their IPO price (excluding dividends).   Both SNAP and Carlyle are happy to take investor money and keep control of everything.  It's an era of oversized personalities that love money and themselves most.