On Edit 2 - The banks don't double their money on large bets. They make smaller risk free sums. The banks are generally paid a certain % of the deal size, and

On Edit 2 - The banks don't double their money on large bets. They make smaller risk free sums. The banks are generally paid a certain % of the deal size, and are expected to make markets in the stock. Most of the people who bought at $26 and flipped at $40 or $45 were individual customers of the banks. These could be retail investors, but they were largely institutional. Generally institutional funds that do IPOs aren't flippers (investors prefer stable capital, so banks don't allocate as much to hedge funds) but they were the ones who had the shares. Net - the banks weren't the ones getting rich from flipping, their customers were.