Daily Trade News

Affirm, Motorsport Games Show the Stock Market’s IPO Process Is Still


The stock market was on the rise Wednesday, bouncing back from early choppiness as investors started to look forward to what they hope will be a brighter 2021. There are still plenty of long-term concerns for market participants to deal with, but at least today, they largely chose to focus on the positives. By the close, the Dow Jones Industrial Average (DJINDICES:^DJI) had sunk back into negative territory, but the S&P 500 (SNPINDEX:^GSPC) and Nasdaq Composite (NASDAQINDEX:^IXIC) were higher.

Index

Percentage Change (Decline)

Point Change

Dow

(0.03%)

(8)

S&P 500

+0.23%

+9

Nasdaq Composite

+0.43%

+57

Data source: Yahoo! Finance.

One sign that stock market participants are engaged and interested in putting their money to work with new investments is that initial public offerings are getting plenty of attention. Today, both Affirm Holdings (NASDAQ:AFRM) and Motorsport Games (NASDAQ:MSGM) had their IPOs, and both stocks jumped out to huge gains.

Yet what some see as healthy IPO demand is actually a diversion of capital away from ordinary investors and the companies in which they want to invest. Instead, Wall Street institutions and a select group of their privileged clients end up getting discounted prices on shares that are worth far more in the open market — leaving most would-be shareholders left to fight over the scraps.

Yellow mosaic tile background with white raised mosaic tiles spelling IPO.

Image source: Getty Images.

2 more big “wins” for IPOs

Shares of Affirm Holdings opened for trading in the early afternoon on Wednesday. The stock opened at $90.90 per share, up more than 85% from where the IPO initially priced. It closed even higher at $97.24.

Meanwhile, shares of Motorsport Games opened higher by 75%. They were trading on the open market by around 11 a.m. EST, and the stock closed right where it had opened, at $35 per share.

Demand for shares of both companies had been heavy. Affirm had initially set a range of $33 to $38 per share for its offering. Underwriters boosted that higher to between $41 and $44. As it turned out, the final IPO price went out at $49.

For Motorsport Games, an initial range of $16 to $18 per share for 2.35 million shares ended up growing to a larger offering of 3 million shares with a higher range of $19 to $20. The IPO ended up pricing at the $20 mark.

Who’s getting rich?

Judging from the news, you’d think that these first-day IPO pops would be good news for the companies and their investors alike. But in reality, the wealth doesn’t necessarily go where you’d expect.

Take Motorsport Games. It sold 3 million shares and got $20 per share for the stock. That will mean $60 million in proceeds, less the fees that the underwriters and others helping on the IPO will charge. If it had been able to sell those shares at $35, the price at which the stock opened, then it would’ve gotten $105 million. That would be $45 million more in cash that Motorsport Games could use to further its video game and esports business — cash that would raise the…



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