IPOs For Space And Beyond... Anatomy of an IPO

**SPEAKER_1** (0:01)
Welcome to the Money Tree Investing Podcast. Stock market, wealth, personal finance, value stocks. Invest in your life.

**Kirk Chisholm** (0:11)
Hello, sorry, Money Tree Podcast listeners. Welcome to this week's show. My name is Kirk Chisholm. I'll be your host. And today, I'm joined with Doug Egren. Hey, Doug.

**Douglas Heagren** (0:17)
Good morning, Kirk. How are you doing today?

**Kirk Chisholm** (0:19)
Happy Monday. Happy Monday. Little rusty this morning. The markets aren't, so.
It's been an interesting day and an interesting week.

**Douglas Heagren** (0:29)
I was going to say, they weren't on Friday. You haven't looked at how they are rolling right now, but it looks like they still continue to be very excited about the fact that as we say in the header of the show, we have a ceasefire and the war is over again.

**Kirk Chisholm** (0:45)
Yeah.

**Douglas Heagren** (0:47)
And the irony is everything going into the weekend and leading out of it is all about rockets.

**Kirk Chisholm** (0:52)
That is ironic, Doug.
Well, for those of you who were not paying attention last week, Friday was a big day where SpaceX went public. They did quite well. I think it was up 19 percent on the day. It was a big boost on that day. The market's like SpaceX or at least Wall Street's version of the market's like SpaceX. Yeah. Let's talk to you quite well. A lot of people made a lot of money. And what's interesting is a lot of people don't understand how IPOs work. But when they come out, they have a release and you can look at the financials and all the details, and it's pretty interesting to look through. SpaceX went public on Friday. You have Anthropic and ChatGPT or OpenAI, I guess it's called, confidentially filed, I believe last week, which means they'll be coming out probably by the end of the month, I would guess. And there have been some chinks in the armor of those. But SpaceX came out with good news. A lot of people wanted to be in SpaceX. Virtually all of them were in retail. Institutions were not touching it with the 10-foot pole, at least any of them I saw. They're not touching it. And it's interesting. I think I want to know this a little bit less. We're going to go over it again, because I think it's really important to understand IPOs.
So when I started in this industry in 99, IPOs are all the rage. And the way you got business from big clients is saying, hey, I have access to IPOs.
That's what people wanted. If you got them IPOs, they gave you business. Now, what's interesting about that is I was at Ping, and we were the small fish in the big pond. If you look at the top tier firms, they were top tier firms or mid tier firms. Top tier firms are like Morgan Stanley, Merrill Lynch. I'm trying to remember who else was back then. Those are the main two. And then there were the mid tier firms like Tucker Anthony.
And then there were some small big firms like Payne-Wilbur. Payne-Wilbur was in the top tier, but it was a small version of the top tier. Prudential was, I think it was probably more mid tier, but it was in the same boat. Either way, I was at Payne-Wilbur. We were not getting a lot of IPOs. I went to Merrill or Morgan.
Well, it's interesting at the time, it's because people wanted them because they went up like 50, 100% the first day and then people get out. Well, after the first year, maybe the second or third year was in the business, they started to change the rules. And what they said was, is you can get IPOs if you held on for 30 days. If you didn't, you didn't get access to IPOs anymore. It was one of those rules that they talk about in those commercials where it's not really a rule, but in the sales meetings, they go out and tell you to do all these things, even though you're not supposed to. It was like that.

**Douglas Heagren** (3:24)
And if you do it, you're done. You'll never be invited again.

**Kirk Chisholm** (3:27)
Yeah. Basically, the thing was, is you get access to the IPOs. If you dump them within 30 days, you will not get access to any future IPOs. Basically, you're at the back of the line. Because obviously, if you can sell them and nobody else wants them, that's fine. But in general, you're at the back of the line. So it's not a deal.
So you did what you're told, and which is fine because if you sold good IPOs and didn't matter, then they changed the rules up and then people became a lot less interested in IPOs.