Finance is really more like glorified accounting
Finance is relevant here in how the markets shift on a day-to-day basis, and the short-term effects this has on perhaps a single company or industry.
Economics is how this turns out, on the macro-scale (nationally, or globally), and in the long-run (years, even decades).
The short version is that a Finance major would tell you that this sort of rapid drop and slight rebound might occur.
Economists would tell you it's still ultimately a bad move, in the long term, for the UK economy.
Not really true. You are essentially paying a higher value for the original offering, which pushes the value at which the company is worth (and could be sold for). The fact you bought it off someone not from the company means nothing, as you are essentially holding on to that IPO for the company, just at a higher price, and taking it off someone else's hands.
On MMO-C we learn that Anti-Fascism is locking arms with corporations, the State Department and agreeing with the CIA, But opposing the CIA and corporate America, and thinking Jews have a right to buy land and can expect tenants to pay rent THAT is ultra-Fash Nazism. Bellingcat is an MI6/CIA cut out. Clyburn Truther.
If you're too worried to take directed market actions, buy indices. Or, since a lack of knowledge seems to paralyze you, you could take advantage of the largest stockpile of investment knowledge ever conglomerated by man, and...I dunno. Type some stuff into a search engine, and see where that takes you.
Absolutely false. You are providing liquidity for the primary investors, allowing the company issuing the stock to sell shares at a higher price. If the IPO was the only time shares changed hands unless the company bought them back then stock would be a worthless means of raising capital.
Beta Club Brosquad
Financial markets only tell you what financiers think is going to be the economic impact. For the impact of Brexit on the real economy, we will have to wait until Brexit actually happens and that will take 2 years at least, perhaps 7+ years to negotiate new trade deals.
But I'm not sure I would rely much on Andrew Neil's economics - he's an opinionated journalist and pretty firmly anti-EU. There's an argument for looking at the FTSE 250, rather than 100, partly because the 100 includes some multinationals that depend heavily on foreign markets, rather than the UK, including some gold mining ones (and gold does well in uncertainty).
http://www.telegraph.co.uk/business/...e-ftse-100-to/
Google search tells me that the FTSE 250 is down 16% following Brexit. I only have a PhD in economics, but to my untutored eye that sounds rather a big deal.
What I am more interested though is the $2 trillion dollars reported to be lost on Friday on world stock markets. That sounds rather spectacular but I hope it was just volatility.
Folly and fakery have always been with us... but it has never before been as dangerous as it is now, never in history have we been able to afford it less. - Isaac Asimov
Every damn thing you do in this life, you pay for. - Edith Piaf
The party told you to reject the evidence of your eyes and ears. It was their final, most essential command. - Orwell
No amount of belief makes something a fact. - James Randi
You're talking about issuing more shares after short selling has already occurred, but I'm telling you that stock offerings, including the IPO, would not be a worthwhile avenue for raising capital without the secondary market and short selling is a side effect of the secondary market. The only way to eliminate short selling is to eliminate the ability to trade securities on credit which is unlikely to ever happen.
Beta Club Brosquad
You're not understanding.
Imagine there's no secondary market for stocks. When a share is bought during an offering, it remains with the original owner unless it is repurchased by the issuing company. If the original purchaser can't sell the shares in a secondary market, they aren't going to pay as much for the share in the first place, meaning the issuer will raise much less capital during their offering. So the secondary market makes issuing stock far more attractive as an avenue for raising capital.
The side effect of that secondary market is that short selling is a possibility. Short selling does hurt a company's stock price in the small picture. In the big picture, however, the secondary market that enables that short selling is the only reason that the company was able to raise capital to begin with.
Therefore, what I'm saying is that it's easy to say that short selling is bad because it damages stock prices but that ignores the fact that short selling is a necessary part of the overall secondary market.
Beta Club Brosquad
Beta Club Brosquad
It's not just you, I don't get it either.
The best I can come up with is the "Bad with the good line" - which is the same sort of paralytic equality of opinion that makes CNN such a shitty news station: "here are two opposing views, we won't do any investigation into their relative effects, we'll present them as being equally valid, you decide which you want to believe!"
Things which are both bad and good, are not equally bad AND good: on the sum, they are usually one or the other - almost never a perfect balance.
A slight increase in liquidity resulting from short selling does not compensate for the significant bad effects it can have on trading. I'm not committing to saying we should get rid of short-selling entirely - but if the only positive for it is that it can benefit liquidity - that's a weak argument.
In macroeconomics, liquidity in itself is not beneficial, except where it enables markets/currencies to a) react, or b) return to equilibrium / proportional parity, faster. Too much liquidity can be a very bad thing - all instances of hyperinflation in history have begun with too much currency liquidity: which leads to seismic capital shifts that throw the entire economy out of whack.
I'm not a finance dude - but surely there must be some equivalent to stocks/markets - where too much liquidity creates instability rather than corrects it?
For the uninitiated, think of liquidity like soil and earthquakes.
You have a farm, there is no water table (no liquidity) beneath you. An earthquake cracks your farm in half. The (dry) ground never heals.
You have a farm, there is a water table beneath you (some liquidity). An earthquake cracks your farm in half. The (moist) soil fills in the crack.
You have a farm, there is an ocean beneath you. An earthquake cracks your ocean in half. You drown. (too much liquidity = hyperinflation)
It is you. You think I'm talking about liquidity affecting post-IPO offerings, but it affects every offering, even the IPO. I never said the IPO was the only offering.
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Jesus Christ.
Secondary transactions provide liquidity. That is not hard to understand.
Short selling is a means of providing liquidity in the market. That is not hard to understand.
Liquidity makes stock offerings a worthwhile means of raising capital because it increases the price that shares can be offered at. That is not hard to understand.
I'm not sure which part is the difficult one to wrap your head around.
Beta Club Brosquad
Most of the discussions here are not really appropriate for your long term investor. As long term investors before you invest you want to ask the following questions.
Is the company well run?
What is the history of their stock value in the last 10 years?
How is their revenue? And what does their backlog look like?
Does the stock pay dividend? What is the historical rate? (It should be reinvested immediately btw)
I do want to add a caveat. Personally, I do not own a lot of single stocks. The ones that I have are all from former employees. I do not suggest single stocks as part of anybody’s investment plan. Single stocks don't consistently generate returns as high as mutual funds do in the long-term. If you really want to own a stock for some reason (company stock, for fun, etc.), limit single stocks to no more than 10% of your investment portfolio.