[asher_]

Can someone explain this to me?

If I own something, I want to sell it for as much as the market will bear. I don't want to sell it and have someone flip it for a huge margin almost immediately.

How is a large first-day bump not considered a failure for an IPO? What is it about the situation that reverses a common sense understanding?

[vecter]

Perception and uncertainty.

Humans are irrational emotional beings. Somethings feels hot because it popped on its first day trading from $18 to $24. Humans don't know the counterfactual, which is that the stock could have been initially priced at $30 and then dropped to $24. Both result in the exact same value of the company, but the first is definitely perceived as better.

Also, it's hard to say what the "true" value of a stock or company is. In practice, it's what people are willing to pay for some shares of it, and we then as an industry standard take that last traded price, multiply it by the number of extant shares, and then come to a "market capitalization" value.

So therefore, people depend on signals such as whether a stock goes up or down to determine whether or not it's hot, since people don't know what a "true" price for the stock really is anyway.