Campling has another explanation: Depending on the terms of the SPV, there are trading strategies that could enable their investors to protect themselves while complying with the typical 180-day lockup that prohibits sales of shares and hedging, he said, citing options as a possible tool. The typical lockup rules focus on the shares, not other financial instruments tied to the economic value of the stock.
Still, it’s unclear how much responsibility SPV investors bear for the early declines in Lyft and Uber shares. EquityZen’s Davda thinks SPVs are not to blame. And there are other reasons for the poor IPO performances.
Lyft and Uber lose lots of money, which has unnerved public market investors. Then there’s the sheer number of other shareholders who already own stakes in the companies. That leaves fewer buyers for an IPO. The New York Times reported this week that the IPO banks struggled to persuade some existing investors to put more money into the companies.
There’s also a potential silver lining to the SPV theory. Once SPV-related transactions and shareholder lockups are “flushed through, then you can look at the stocks on a pure fundamental basis rather than being at risk from synthetic structures,” Campling said.
After Facebook’s initial swoon, the stock rebounded and then soared. The shares now trade at roughly five times their IPO price.
This article was provided by Bloomberg News.