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The big news before Zipcar's initial public offering this morning was that the 12-year-old company still hadn't managed to turn a profit. Then when the stock surged upon hitting the market, the story shifted to how amazingly well the stock was doing. Now, with less than an hour left before the markets close, Henry Blodget has announced that Zipcar's IPO underwriters "screwed" the company out of $50 million.

Blodget's argument on Business Insider is that JP Morgan and Goldman Sachs, who underwrote the Zipcar debut, acted unconscionably by pricing the stock at $18 when they sold it to their institutional investors last night. That was the opening price, but within minutes it had soared to near $30.

The value of ZipCar-the-company, it seems safe to say, has not appreciated by 50% in the past 12 hours.  And that means that, on its underwriters' advice, ZipCar sold its stock way too cheaply. It also means that the institutional investors who bought ZipCar's stock last night are high-fiving each other this morning, celebrating their instantaneous 50% gain. (Lots of them are probably also dumping some stock).

Blodget goes on to compare the IPO underwriters to a real estate agent who represents both the seller and the buyer, then rips off the seller by letting the buyer buy a house cheaply and then resell it at a much higher price the next day. But for somebody who's something of an expert in securities fraud and dirty investment deals, he seems to be taking a pretty simplistic view. IPOs that jumped 50 percent on their first day weren't uncommon in the late 1990s, even among companies that weren't making a profit. Zipcar was founded in 1999, at the height of that boom. Even during the recent recession, OpenTable's May, 2009 debut rocketed 60 percent its first day.
The Wall Street Journal points out that the company's debut was "widely expected to fare well, based on demand for a small supply for shares. The company has a strong brand name and is considered a first mover in a new car-rental business model."
That could mean that the surging shares were to be expected--or it could mean that, as Blodget says, given that they were expected, the shares should have been priced higher to begin with. Blodget himself admits that "underwriters always try to modestly underprice deals ... to reward institutions for taking the risk of analyzing and buying the stock of an unproven company," but thinks there's a big difference between a modest underpricing and what happened here. And while "ZipCar will get a lot of breathless headlines this morning," he's not sure "this positive halo is worth a 50% IPO discount."
Putting all that together with the history of surging shares? Sounds like while the scenario painted by Blodget is pretty nasty, IPOs are on the swindly side in general. Why would someone with such a close knowledge of tech IPOs react to a relatively standard one with such disgust? It could be that Blodget is lighting a fire just to watch it burn. Or maybe, just maybe, the one-time investor with the touch of gold smells the sort of shadiness that got him banned from trading.
Anyway, nobody in this media melee has actually talked to ZipCar, Goldman, or JP Morgan. And they're the only ones who know whether or not they're happy with the day's events. For the rest of us, the question is merely whether to buy, sell, or rent.

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