[el_nahual]

The IPO "pop" is not captured by banks: it's captured by the banks customers that pre-buy at the IPO price.

Basically, before an IPO, the underwriters take the company on a "roadshow" in which they pitch the IPO to potential buyers.

There's a hierarchy of these: the best are very large buyers that place large orders and trade seldom. Pensions, sovereign wealth funds, etc.

Those buyers then make offers ("I'll buy 50MM at $100"), which the bank uses to set the IPO price. The bank then gives them an allocation.

If you're a high (10MM+) net worth individual that banks with one of the underwriters, you can often get an allocation in an IPO. The richer you are, the more of an allocation you can get.

When an IPO pops, it's these people that get the benefit.

The benefit for the company is that the stock is owned by prime people the bank selected: you crucially _don't_ want to just sell to the highest bidder if they are going to dump the stock immediately after the pop (or that's the theory, at least). They have stable shareholders with a vision aligned with management.

The benefit to the bank is that they get to reward their customers with access to profitable trades--but the bank itself does not profit.

[SilverElfin]

Seems undemocratic. Everyday folks can’t buy even though they would want to

[andruby]

Capital and Finance was never democratic. And I doubt it ever will. It’s literally those with more money have more power.

[conradev]

It’s just a bulk discount: everyday folks simply can’t be relied upon to buy hundreds of millions of dollars the stuff and that’s what the company is selling. Little fish can buy in, but only if the big fish provide liquidity in the first place! In other words: someone needs to be paid to sell it and big buyers need to be incentivized to buy it.

Ultimately the IPO price is driven by supply and demand with a limited supply: price will go down (a bit) when the lockout period ends and more supply comes online.

[tossandthrow]

It is, it is yet another of the constructions that increases inequality and makes rich people richer.

Yes, an ipo is volatile, it should be! You are literally pricing a company.

Sigh, regardless, Thisnis again one of these ways where free markets are being smashed by monopolistic behavior - you can only be a part of the game if you already have enough.

[bornfreddy]

It is undemocratic, but it is capitalistic.

[ic_fly2]

Not all IPOs pop

[ryanjshaw]

What makes it undemocratic?

What do you propose? A speculative free-for-all like with crypto meme coins?

[mhh__]

This is actually a funny thing for risk mgmt because a trader will say "I want a bajillion shares in this IPO", risk notice it and say "a bajillion!?" not realising that ask for 10x more than you think you'll get allocated.

You also sometimes need to tactically trade with worse brokers so they will feel nicer during an IPO.