Latest / The Startup Exit Podcast with Fexingo: IPOs, Acquisitions, and Founder Liquidity Events / How Founders Use Listing Day Trading to Avoid Underselling
Transcript
- Lucas: So we've spent a lot of episodes on the mechanics of the exit itself — the earnouts, the lockups, the dual-track process. But there's a moment that almost never gets talked about, and it's the one where the founder is most exposed: the first forty-eight hours after the IPO bell rings, when the stock starts trading and the price is suddenly out of the founder's hands. Luna: That's the scariest part, right? You've spent years building the company, you price the IPO, and then the market decides your narrative in about thirty minutes. Lucas: Exactly. And what we're seeing more of — especially in this August 2026 window, with the market pretty choppy — is founders quietly setting up their own trading desks or hiring specialist execution traders to defend the stock in those first days. Not to pump it. To keep it from cratering below the offer price. Luna: Wait, that's legal? A founder buying their own stock on the open market right after the IPO? I thought there were quiet periods and all kinds of restrictions. Lucas: There are, and that's the nuance. The quiet period restricts what you can say, not what you can do with your own money. And there's a well-established mechanism called the syndicate covering bid, where the lead underwriter is allowed to buy shares in the open market to support the price, up to fifteen percent of the offering, for a short window. That's the stabilization agent at work. Luna: So the underwriter does it. But the founder can't just call their broker and say 'buy a million shares,' can they? Lucas: Not exactly. The SEC draws a line between legitimate stabilization and what would be considered market manipulation. The covering bid has to be disclosed, it's limited in size and duration, and it has to be coordinated by the managing underwriter.The thing that's new is founders using their own capital — either through a personal account or a family office — to buy shares in the open market after the quiet period lifts. That's not prohibited, but it has to be done very carefully, usually through a separate trading entity, with clear walls between the company and the trading decision. Luna: And you're seeing that in practice? Because I feel like most founders are just sitting there watching the ticker go down, praying. Lucas: Look at the data we pulled this week. Amazon up fifteen percent in five days, Palantir up nearly thirty. But that's the market being euphoric. There are other names — Rivian down seven and a half, Coinbase down eight — where the listing day was rough.And in those cases, a founder with a chunk of their net worth tied up in the stock has a real incentive to step in and buy if they believe the sell-off is irrational. Luna: But isn't that just catching a falling knife? The market is telling you something with that price. Lucas: Sometimes. But there's a well-known case from a few years ago — I won't name the company because it's still trading — where the stock dropped twelve percent in the first week, the founder bought about fifty million dollars' worth through a holding vehicle, and it stabilized. The buy was disclosed in an 8-K filing weeks later, and the narrative shifted from 'the IPO was overpriced' to 'the founder has skin in the game.' Luna: So it's partly a signal. You're not just propping up the price, you're telling the market 'I still believe in this story.' Lucas: Exactly. And that's the key distinction. The SEC cares about intent. If you're buying to create artificial demand and deceive investors, that's manipulation. If you're buying because you genuinely think the stock is undervalued and you're willing to hold it for years, that's just investing in your own company. The line is fuzzy, but it's there. Luna: And there's that famous case with the energy company in the early two thousands, where the founder was buying stock and the SEC said that was manipulation because he was doing it to keep the stock from falling, not because he believed in it. Lucas: Right, that's the Enron-era example, but there are more recent ones too. The SEC has brought cases against executives who bought stock around the IPO lockup expiry or around earnings announcements, where the timing was just too suspicious. And that's where the rules around Section Ten-b and Rule Ten-b5 come in — you can't use your position to create a false appearance of trading activity. Luna: So what's the practical guidance for a founder who's thinking about this? Not the SEC memo, but the actual strategy. Lucas: First, you need a pre-planned trading plan, usually under Rule Ten-b5-one, that sets out exactly when and how much you'll buy, regardless of what the market is doing. That way, if you do buy, it's hard to argue you were reacting to the price. Second, you should use a separate investment vehicle, not your personal brokerage account. Third, you have to disclose the purchases in a timely fashion — typically a Form Four or an 8-K. Luna: And the size? You mentioned fifty million dollars. Is that typical, or does it scale with the company? Lucas: It scales. For a small-cap IPO, maybe five to ten million. For a mega-cap, you're talking hundreds of millions. But the percentage matters more. I've seen founders buy anywhere from one to three percent of the float in the first month. That's enough to move the price without looking like you're trying to corner the market. Luna: But there's a risk beyond the SEC, right? You're locking up your own capital into a stock that might keep falling. You could be the guy who bought the falling knife. Lucas: That's the real risk. And that's why I think the smartest founders don't do it themselves. They hire a specialist — an execution trader who knows how to buy without moving the price too much, who can spread the orders over days, who understands the dark pools and the algorithms. It's a skill set that's totally different from building a product. Luna: So you're saying there's a whole cottage industry of post ipo trading consultants now? Lucas: There is. And it's growing fast because the market has been so volatile this year. We saw it with the AI boom and bust cycles — a founder can go from hero to zero in a week, and the stock price doesn't always reflect the fundamentals. So more and more, founders are saying 'I'm not going to leave my net worth to the whims of a momentum trader.' Luna: It's like an insurance policy. You're paying a trader to reduce the downside risk of your own IPO. Lucas: Exactly. And it works best when the company has real cash flow or access to capital. Because you're not just buying stock — you're also signaling to the market that you have the resources to defend the price. That's a strong message in a risky tape like we're seeing right now. Luna: Makes sense. And it reminds me of that old saying: 'the best time to buy is when there's blood in the streets.' For a founder, the blood is their own. Lucas: Ha, that's one way to put it. But there's a broader point here that I think is worth holding on to. The exit is not the end of the story. For many founders, the IPO is just the beginning of a new relationship with the public markets — and the first few days set the tone for years. If you can defend your stock in that vulnerable window, you buy yourself credibility with analysts and institutional investors. Luna: And that credibility can be worth more than the fifty million you put in, right? Lucas: It can be. But I'd also say — and this is where I might get a little contrarian — there are times when you shouldn't defend the stock at all. If the market is telling you that your price was too high, and you have a real business underneath, sometimes it's better to let it fall, let the stock find its level, and then buy back with a clear head three months later. That's a harder conversation to have with your board, but it's often the smarter financial move. Luna: So it's a judgment call. You have to know why the stock is dropping. Is it a market-wide sell-off or is it specific to your company? Lucas: That's the first question. If the whole sector is down twenty percent, stepping in to buy your own stock is like trying to hold back the tide. But if your peers are stable and you're down ten percent on a piece of bad news that you think is overblown, that's when a well-timed buy can pay off. Luna: And the tools exist now that didn't ten years ago. You have algorithms that can measure the order flow, you have real-time data on who's selling, retail versus institutional. Lucas: Totally. It's a different game. And that's why I think we'll see more founders building these capabilities in-house, or at least having a trusted advisor on call. The era of 'set it and forget it' post ipo is over. Luna: Before we go deeper into the mechanics, I want to step back for a second. We've been talking about this as a strategic tool, but there's a human element. For the founder, it's the culmination of a decade of work. And watching the ticker go down on your first day as a public company — I can't imagine the emotional weight. Lucas: You hear stories of founders who don't even look at the price on day one because they can't handle it. Others are glued to the screen, refreshing every second. It's a uniquely vulnerable moment — you've just handed your baby to the public, and now they're judging it in real time. Luna: And that's where these conversations become genuinely useful. If you're a founder listening, you might not have thought about the trading desk as part of your exit plan. But it's as important as the underwriting team or the legal counsel. Lucas: Absolutely. And speaking of useful — I know we're in the middle of the show, but I want to mention something that keeps this podcast going. We don't run ads on this network, and that's because listeners like you support the shows directly. If these conversations help you think about your own company or your own career, and you want to keep them free and ad-free, you can support us at buy me a coffee dot com slash fexingo. It's a low-key way to say thanks and keep the lights on. Luna: Yeah, and it genuinely makes a difference. Every little bit helps us keep doing the research and bringing in the experts. Lucas: So, back to that founder who decides to defend the stock. What does the actual execution look like? You've got your trading plan, you've hired your specialist, and the stock is sliding. How do you make the first buy? Luna: I'd imagine you don't just dump the whole order in one go. You'd want to be patient. Lucas: Right. You scale in. Maybe you buy five percent of your target on day one, ten percent on day two, and then you wait. You look for what the traders call a 'support level' — a price where the stock has historically bounced. You put in a limit order just above that. And you don't chase the price. If it's falling too fast, you wait for it to stabilize. Patience is the edge. Luna: And you're monitoring the news, too. If there's a negative analyst note, you might want to hold off. Lucas: Exactly. You're not just buying a stock, you're managing a narrative. And that's where the founder has an advantage — they know the business better than any outside investor. They can judge whether a piece of bad news is a blip or a fundamental change. Luna: So the ultimate takeaway is: if you're going to be a public company, you need to be prepared to manage the first days like you manage the company itself — with a strategy, a team, and a clear head. Lucas: That's it. And it's a skill that founders are only starting to learn. The ones who do it well will set themselves apart in the eyes of the market. The ones who don't might find themselves with a stock price that doesn't reflect the company they built — and that's a harder problem to fix after the fact. Luna: Well said. Great episode, Lucas. Lucas: Thanks, Luna. And to our listeners — if you're in the middle of an exit or planning one, I hope this gives you a new tool for the toolkit. The market is always watching. Make sure you're watching it back.