Imran Khan
speaker
171 appearances
1 recordings
1 series
first heard Aug 2024
last heard Aug 2024
Imran Khan’s voice in public audio — every appearance, attributed to the second.
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Appearances
And then you go to the roadshow and then based on the demand, either you hopefully raise the price range because of the price range going down, that's a bad thing. So you start with the price that you have a 98% conviction that you can price it at that range. And then you go off from there. And that depends on the demand and the feedback you get from the investors.
And basically you ask them what is their price target on that company is. Sometimes they share a price target that's way too high. Sometimes they share a price target that's way too low, depending on who has the power. But that's how you come up with a price target based on the demand you see in the market.
If the book is 10 times covered by high quality investors, 10 times covered, let's say you're selling 100 shares, there's a thousand shares demand, high quality investors, you know that you can potentially raise the price. But you have to look at what is the price target of this company could be at least near to midterm and at what price people will continue to buy. So if you...
set the price at a too high, nobody going to buy the stock. And then all these people who bought the stock, they want to sell the stock.
Yes, because the thing is that the concentration comes from, if you give Fidelity a million dollar allocation, they will dump the stock. They might disagree with that, but a million dollar, ultimately, if you have to think about it, if you're a portfolio manager, you're owning 30 names, 40 names, 50 names, 60 names, whatever the number is, right? And you are managing a lot of money.
So if you give them a small, very, very small allocation, it doesn't move the needle. So then either they have to buy more so that it moves the needle or you have to sell it out because there's so many names you can track and so many names. You don't want to own a bunch of names that then you're buying, running an index fund, right?
But if you're really an active portfolio managers and you're trying to generate return, you have to
size them and you have to have an understanding okay is this stock's going to go x amount and it will generate x and y amount of return for my fund they have to get a certain amount of size for them to care about that position so that they can add more and that's why the pricing mechanism comes into the play i'm so enjoying this so we said about kind of the m a versus the ipo optionality in terms of liquidity the thing that people forget though is the lockout period
What determines the different length of lockup period? So the standard lockup is 180 days. And the reason they do that, they want to manage the oversupply in the market. Second, it also protects the banks that, hey, insider knows something. You want market to season out, right? The company reports two quarter numbers that helps educate the market and things like that.
A lot of the VCs, you know, I never like it, but a lot of the VCs push hard to shorter lock up. Hey, if the stock goes up a lot and stays up for a certain period of time, then we can sell. But I think that's the, if I were an operator or a banker, I would push back strongly against it because it sends a very bad message to the investors.
Because you're basically saying that you think the stock going to go up in a shorter term and it not going to stay there. And that's why your existing investors want to get out. What's the rush?
I think they're both right, depending on your duration, because they do have, you know, if you have a management company that you have 10 years of history and you understand how their ability to execute in difficult environment, if you have that understanding, that ability to pivot, great founders are very good at pivoting.
If you think about it, all the great business where they started and where they became is very different business. Google started as an enterprise search business. Netflix started as selling DVDs online, not even rental. You know, Amazon started as a bookstore business. So now look at all these businesses where they generate most of their money. It's completely different businesses.
So I think the great founders are great at pivoting. And so the risk with the business is any businesses is not either. Obviously, you have a near term risk, which everybody knows. The asymmetric understanding about the business that helps you to create long-term return, that is, you cannot quantify financially, is that a group of people's, their ability to navigate difficult environment.
And that's very powerful, but that's not going to pay any dividends in the short term. So I think Sequoia is right that they have that information and if they want to take a 10 years view, I think that's totally fine.
But in a one to two years basis, they probably, as you're right, they're probably not going to be better than a public market investor who knows how to manage public market risk much better than a private market investor.
Gosh, there's so many inputs.
I think for businesses and for the economy, low regulation is better. I'm not saying no regulations. I think regulations are good, but we need regulations to be smart. Could the changes to unrealized cap gains actually happen? It makes me laugh that when people talk about unrealized cap gain in the private market context, the entire venture capital world is so small. It doesn't really matter.
But people are not realizing that. Think about it. Like, okay, what happens to the farmland?
are you going to tax the farmers what happens to the real estate people who own all this real estate they are illiquid are you going to charge them an unrealized gap gain so they have to sell the real estate you're going to destroy the real estate market honestly taxing on unrealized cap gain on amazon is least of our problem unrealized cap gain tax on a headline is not a good idea.
Showing 81–100 of 171 · page 5 of 9
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