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May 23, 2009

OpenTable IPO Cheats Shareholders

-- by Dave Johnson

A company called OpenTable went public this week, and its share price went up 59%,

Online restaurant-reservations system OpenTable Inc. dished out the best IPO performance since late 2007, delivering a 59% gain in its trading debut.

Shares of the San Francisco company on Thursday closed at $31.89 apiece on the Nasdaq Stock Market, well above its initial offering price of $20.

Investors would have to go back to December 2007 to find a better first-day close, from Orion Energy Systems Inc., which rose 65% during its debut.

This first-day rise in the price is presented by the business media as a good thing, worded as "best performance" and a good first-day close, demonstrating again how the business media favors corruption over competence.

You see, what this first-day rise in price tells us is that the underwriters grossly underpriced the stock, which the business media did not explain. The company should have gone public for $30 a share, which the market demonstrated, rather than the $20 a share that the underwriting companies allowed insiders to buy at on the opening. The way this racket works is that insiders get the special $20 price and can sell at the $30-35 price later in the day. The company, however, only received the $20 per share it offered, cheated out of the $30 it clearly should have received. Others got rich at their expense.

Posted by Dave Johnson at May 23, 2009 1:08 PM


Comments

This kind of wall street manipulation is what in large part caused the Dot Com Bubble and subsequent bust.

This activity was being investigated by the SEC and other government agencies and the curtains were about to be pulled back when 911 happened and the SEC headquarters at WTC7 was destroyed and the investigations went down with WTC7.

Anyone remember?

Posted by: BadGimp [TypeKey Profile Page] at May 24, 2009 12:08 AM

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