MongoDB shares jump more than 30% in $192M IPO

Re:MongoDB shares jump more than 30% in $192M IPO by mikestew on Thursday October 19, 2017 @02:07PM (#15510145)

I see it as the founders needlessly missing out on 30% of money (in this case), which ends up going in the pockets of the Wall Street middle men that get first access to the stock offering.

That's the system as it's currently implemented, yes. Underwriters have some folks on tap that they'll let in on the IPO. IOW, folks that'll dump money into the IPO. But those folks aren't suckers, they'd like to see a return on their investment, if not individual investments then at least in aggregate. So, in summary:

1. Companies want someone to buy their new shares.

2. Brokerages have such folks on tap.

3. However, those investors wants a return.

4. So the underwriters set the IPO price a bit low so as to increase the chances of investors getting that return, which means those investors will come back next time for, say, pets.com's IPO.

I doubt this is written down anywhere, but that's the impression I get from observing IPOs (tech and non-tech) for 20 years or so.

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Re:MongoDB shares jump more than 30% in $192M IPO by jamez1 on Sunday October 22, 2017 @07:34PM (#15529649)

Those investors are given allocations based on how much the brokers like them, how much brokerage they pay, etc. The book build isn't done on the highest price, that's the messed up part.

If it was done on the highest price - then those investors who are buying after IPO would have put in bids in the IPO and there wouldn't be a pricing gap.

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