> In an institutional fundraise, all buyers must get the same price
Isn't that the basic problem? Don't we have tons of auction theory on how to not sell all at the same price? presumably that auction theory also properly doesn't confused the varying unit price vs total money raised (it's integral).
During roadshows, underwriters are essentially leveraging their rolodexes. These relationships constitute a significant part of the value they are bringing to the table.
If there would be a different price for each investor, some would get a better price than others, and those that got a worse price would not feel very good about it, likely deeming it unfair (there are still people behind the processes, and people can't help but experience emotions of fairness and a lack thereof).
As a result, relationships would likely suffer due to this human aspect to it, and weirdly enough, these grudges can easily get absorbed in the 'institutional memory' and linger there long after the original human protagonists have left the organisation.
A way to address this, would be to introduce rules like first-come-first served, which would imply giving up a degree of control by underwriters and the company. This, however, introduces risk for the company which, after all needs that control in order to maximise value.
It's not a simple problem to solve, but maybe there is a better solution somewhere out there...
If the company wants the highest price they would do an auction of successively increasing lot sizes.
However, the pool of investors for something like this is small enough that you’d be trying to fight out-of-band collusion. Similarly the underwriters don’t want you to have the highest price. They want the investors to get a price better than the stock is actually worth so that they continue to show up to deals the underwriters organize.
I too think there must be a better way but I suspect you may need some regulation and enforcement of this market to actually see it through.