Seeing that IPOs are designed to pop, I don’t find it that surprising. The naive way to look at an IPO that pops the first day of trading is that the investmen

Seeing that IPOs are designed to pop, I don’t find it that surprising. The naive way to look at an IPO that pops the first day of trading is that the investment bankers left a lot of money on the table and the company got screwed. But if an IPO was set at a fair price (the price after the first day of trading), the company might have a hard time generating the pre-IPO demand in the first place for their roadshow. After all, the only reason to subscribe to an IPO and get pre-allocated shares is to make some juicy risk-free returns. So the company makes the explicit choice to trade off short-term profits for short-term (but hopefully longer) artificially induced demand. The bankers win by allocating shares to investors they like hoping that the favor will be returned in the form of business in the future (on top of the fat fee they make). The subscribed investors win by the risk-free return. The company wins be inducing demand. This has been the process and the incentives that have governed IPOs for a long long time. It’s interesting that this process might be supplanted with direct listings or auctions ala Spotify or Google.