Why don't they structure IPOs as an auction, such that the initial sale is at the market price.
Why do you think this would work? Google IPOed with a dutch auction, and went on to pop 30% in the first 2 days.
An auction allows you to find a market-clearing price, but does not allow the information-exchange to do proper price discovery, so it doesn't solve the problem. The IPO pop is typically explained as the reward for taking the risk of buying an unpriced asset.
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Why do you think this would work? Google IPOed with a dutch auction, and went on to pop 30% in the first 2 days.
An auction allows you to find a market-clearing price, but does not allow the information-exchange to do proper price discovery, so it doesn't solve the problem. The IPO pop is typically explained as the reward for taking the risk of buying an unpriced asset.