If anyone is wondering why PAYC is down 6+% today SA has a blurb about it here
Paycom (NYSE:PAYC) is selling 4.5M shares (over 7% of outstanding shares) on behalf of investment firm WCAS, company execs, and other holders at $37.95, 6.5% below yesterday’s close. The underwriter (Barclays) has a 675K-share overallotment option.
I don’t really see a need to worry about it, beside not knowing if selling for 6.5% less than the share price is abnormal or why WCAS would sell at that price?
beside not knowing if selling for 6.5% less than the share price is abnormal or why WCAS would sell at that price?
Because the underwriters insist on making a profit, for themselves and their favored clients. They’re not going to do that deal at market price.
Saul talks a little bit about this process in post 2207.
Neil is right. The process is called “pricing in the hole.”
Kind of like giving good clients IPO shares with the likely pop over the opening price.
And note that there’s no dilution, no new shares, just venture capitalists taking cash out so they can invest in another startup.