The big capital market news today is Rodman & Renshaw’s announcement of the planned launch of “DirectMarkets”, an automated means for companies to sell shares directly to investors.
Like any new capital market development, this announcement was met with some skepticism about its likely success in the marketplace.
Will it operate like a vending machine, available 24/7?
How much control will companies retain on timing and pricing of new issues?
Will listing a company’s shares effectively cap its price appreciation since any demand can be filled with primary shares? And what about the effect on liquidity?
One of my colleagues reminded me of another major capital market development, the dutch auction IPO, used with much fanfare on Google’s IPO five or six years ago. It’s interesting to note that the recent major IPOs, including Facebook’s planned IPO, use the traditional method, not the dutch auction IPO.
So, we will debate the future of DirectMarkets, but only time will tell.
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