It's important to remember they only sold about 10% of the company, not the whole company, with the IPO. So most of that 50% gain also accrued to equity still held by the holders prior to the IPO. So yeah, maybe they could have priced 30% higher and pulled in an extra 5M in cash, but it would have also meant more risk that they sully the 90% they still hold with a bad first-day performance in the market.
I doubt they're crying in their milk tonight at Zipcar headquarters.
It's very hard to innovate in IPOs, probably partially because these first day gains don't tend to bother issuers. Bankers would rather do things the traditional way (and make institutional buyers happy with big first day gains) and issuers tend to be relatively conservative about risking their only IPO on a less-proven method
Look at it this way: if you're the CEO, you're not going to get fired because of a 50% first-day gain. But if you botch things because you wanted to do a non-traditional IPO, you may be.
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It's important to remember they only sold about 10% of the company, not the whole company, with the IPO. So most of that 50% gain also accrued to equity still held by the holders prior to the IPO. So yeah, maybe they could have priced 30% higher and pulled in an extra 5M in cash, but it would have also meant more risk that they sully the 90% they still hold with a bad first-day performance in the market.
I doubt they're crying in their milk tonight at Zipcar headquarters.
Auction IPOs are supposed to fix this problem, although I suppose clueless buyer's remorse could lead to a first-day drop in such a case.
It's very hard to innovate in IPOs, probably partially because these first day gains don't tend to bother issuers. Bankers would rather do things the traditional way (and make institutional buyers happy with big first day gains) and issuers tend to be relatively conservative about risking their only IPO on a less-proven method
Look at it this way: if you're the CEO, you're not going to get fired because of a 50% first-day gain. But if you botch things because you wanted to do a non-traditional IPO, you may be.