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Comment by echelon | Hacker News Reader

I appreciate your sarcasm, but we all know it isn't just a small fee.

Airbnb lost out on over half the money they could have raised.

edit:

Priced to the banks at $68/share [1], opened to the public at $146/share the next day [2]. Free money for the banks, missed opportunity for the Airbnb balance sheet, and continued shut out of retail investors (even those with a large net worth).

This keeps happening. Snowflake and C3.ai left over 100% on the table to the bankers, and DoorDash left almost as much [3]. Bankers continue to get free money that the companies could use themselves for hiring and other expenses.

[1] https://www.nytimes.com/2020/12/09/business/airbnb-ipo-price...

[2] https://www.barrons.com/articles/airbnb-prices-ipo-at-68-a-s...

[3] https://www.fool.com/investing/2020/12/20/why-i-didnt-go-all...

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An IPO pop does not necessarily mean that any money has been left on the table: just because some shares trade at $146 doesn't mean that all of them could have been sold for the same price. The demand curves slope downwards.

However, when the pop is as large as it was in the case of Airbnb, it does seem like they could have raised more cash.

This. All to the benefit of the investment bank and their best customers who are rewarded with allocations of “hot” ipo’s.

How I know this: I have been the recipient of allocations in the past.

In return for telling them how much your interested and at what price.

Markets have order books for that kind of thing. In fact, that is what a direct listing is based on.

No, they tell you what the price will be at the last moment. They do indicate a range. They don’t really care what you think about the price.

This is not the same as an underwriting fee, and there is still the possibility that a company underprices their stock offering as well.

First I’ve heard of this - do you have a source handy?

I think OP is alluding to the fact there was a big pop on IPO day (which indicates that the IPO was mispriced). Though that is not a "fee", but money left on the table for the company.

And the pop in Airbnb's case was pretty enormous. They priced at $68 and closed on the first day at $144.71

I continue to be flabbergasted any time these companies don't run an auction. Ideally N auctions, spread out through the day.

Google did. The banks liked to release articles saying it was a disaster but they were pricing it lower than that so overall Google came out ahead.

He’s referring to Goldman most likely deliberately underpricing the stock. During the IPO the investment bank gives access to certain folks: Their clients. They doubled their money almost risk free since they know demand.

Right. That's why I always thought buying IPOs is a bit of a mug's game.

Buying anything volatile is a mug's game. An IPO is infinitely volatile since it has no history.

I didn’t know that was a thing.

> They doubled their money almost risk free since they know demand.

They only did double their money if they can sell without pushing the price down. That's not easy to do for institutional investors.

In fact, institutional investors often make informal agreements to not flip the shares in exchange for their allocations.

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