SEC rules say that underwriters (i.e. most of Wall Street) aren't allowed to hype their own handicraft until a suitable number of days have passed. The length of this "quiet period" keeps changing, but according to this article, it's now 10 days on the books, with most underwriter/analyst firms choosing to play it safe and observe 25 days of restraint.
What is a underwriters/handicraft? Are they writers paid by the company to write bearish articles about them and have 'no' affiliation so there's no disclaimer?
In an IPO, the underwriters are the investment banks who handle the initial distribution of the stock. From Wikipedia:
"Securities underwriting refers to the process by which investment banks raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt capital). The services of an underwriter are typically used during a public offering in a primary market.
This is a way of distributing a newly issued security, such as stocks or bonds, to investors. A syndicate of banks (the lead managers) underwrites the transaction, which means they have taken on the risk of distributing the securities. Should they not be able to find enough investors, they will have to hold some securities themselves. Underwriters make their income from the price difference (the "underwriting spread") between the price they pay the issuer and what they collect from investors or from broker-dealers who buy portions of the offering."[1]
When the comment above said "underwriters aren't allowed to hype their own handicraft", the "handicraft" he's referring to is the new stock that they just distributed, and hyping it generally takes the form of the banks' analysts issuing "buy" recommendations.
In short, SNAP's IPO was big enough that most of the banks which like the company participated in the IPO. Legally anyone involved in the IPO can't publish an analysis for (IIRC) 10 days, which means that the banks which like them can't talk.
Interesting, does this create a perverse incentive for SNAP to get as many banks as possible onboard so that there's a bigger embargo on analyst commentary? Provided they can get enough banks, natch.
Wall Street provides highly liquid markets to the rest of the world, but when it comes to the way the finance sector's own services are delivered, the pros excel at turning price-efficient markets into cozy cartels.
Isn't that backwards? They'd like to have a friendly bank who didn't buy any of their stock who could just talk them up (though whether they'd like that more than money in their pockets is questionable); at the moment their friends are all embargoed and only their enemies are talking.
Exactly. It would be convenient for Snap if there was a friendly bank who hadn't bought into them, because then that friendly bank would not be embargoed. But there's no reason for a bank to do that.
You said "does this create a perverse incentive for SNAP to get as many banks as possible onboard so that there's a bigger embargo on analyst commentary?" which to my mind is backwards: the embargo creates a perverse incentive for Snap to get as few banks as possible onboard so that there's a smaller embargo on analyst commentary.
Brokers involved in the IPO, including for example Morgan Stanley, Goldman Sachs, J. P. Morgan, Deutsche Bank, Barclays, Credit Suisse, Cowen, Jefferies, RBC, Stifel and UBS, are restricted for 10 days. Don't be surprised to see a few buy ratings at that point.
That's because every bank that's bullish on Snap participated in the IPO and is legally prevented from posting research about it for some time. It's a self-selected group of analysts that say sell.
That's pretty unusual for a 10+ billion dollar company