I suspect IPOs are almost always dumping on the public. Some go on to perform great afterwards but on the whole if you think your shares are worth more than they’re priced why would you sell in an IPO?
1. Diversification: the vast majority of individuals owning pre-IPO shares almost certainly hold options, and in tech companies at least where regular employees get these options few of these individuals are likely to have a large, diversified portfolio.
2. For those same individuals, it's often a life-changing event. (In my case, I went from servicing 6-figures of medical debt and 5-figures of student loan debt and contributing the minimum to my 401k to a 7-figure net worth with income producing, debt-serviced assets.)
For example WeWork with Neumann or Uber with Kalanick.
Is negative unit economics better than a token with absolutely no utility?
I would say yes - because they often create a valuable marketplace that serves customers and pays providers. They just find out later that they are in a race to the bottom with other platforms. Which means healthy market competition.
However, if the stock continues to do well, it means the shareholder class (now representing public shareholders) continues to extract rents from both sides of the ecosystem. Uber is still extracting rents years later… drivers pay it half what we pay them.
An open source platform economy would have been better for the public, with none of the controversy of Big Tech platforms. All these Ubers could have been had source competitors a long time ago. Why don’t they?
Let's say you own $10M in privately-held Stripe stock. You think that stock is probably worth $100M, but you'd like to buy a $2M house. The bank doesn't accept your privately-held stock as collateral for a mortgage. It'd make sense to sell some portion of your stock to buy that house.
Now, suppose instead you think there's a 95% chance the stock goes to 200M, but a 5% chance sketchy financials tank the entire company and it's worthless.
Especially in the aftermath of the FTX meltdown, I've heard plenty of second-hand stories about people who were fabulously wealthy on paper, and then suddenly not wealthy at all. Diversification would have limited some of the risk and preserved some of the wealth, at the cost of part of the upside. Your expected value might go down, but your worst-case scenario goes up.
https://www.nasdaq.com/articles/what-happens-to-ipos-over-th... has some interesting numbers, and lots of what it shows seems to fit the "dumping".
Of course, if I owned any stock in a pre-IPO company I'd want to dump it as fast as I could, too. IPO companies are rarely profitable, after all.
The most successful IPOs for the company are where it sells a bunch of stock at prices that then stay steady or even go down, they traded (potentially worthless) paper for real cash. I suspect the majority of IPOs are "successful" in the second way even though they're "sold" as being (a chance?) at the first way.