[basch]

It's not quite the same, but the ETF's; USA - IPO, FPX; and International - IPOS, FPXI, FPXE.

They buy IPO's after they launch, and then sell them after a set duration, automatically managing inflow of new and outflow of old. Youre not able to buy specific companies, youre instead buying into the idea, trends, and behaviors of IPOs as a whole. They also dont capture the huge initial jump in price.

Go with a 60:40 IPO:FPXI to capture all the ipo momentum in the world.

[nicoburns]

> They also dont capture the huge initial jump in price.

I don't understand why this is allowed. Why don't they structure IPOs as an auction, such that the initial sale is at the market price.

[murgindrag]

Half corruption, but the surface argument is:

Companies want stability. If my plan is to raise $2 billion with an IPO, I want to be able to build a business knowing that money is coming in. With an auction, I wouldn't know how much money will come in. It might be $4 billion, or it might be $500 million.

The current structure has a financial intermediary who charges a premium to take the risk of a price DROP for me. I can shop around for who will give me the best price, and once I've got that locked in, I know my $2 billion will come in, and I can start building my engineering, marketing, etc. with the stability of a guaranteed check in the bank.

That stability is worth more than the premium.

[timcalhoun]

It can't be difficult to design an auction where the amount of $$ raised is set, with the "price" being the valuation (ie. what % of the company the investors are willing to own).

[sokoloff]

That’s basically how Treasuries are auctioned. The problem for an individual company is I might be interested to IPO only under certain terms and be willing to pay a middleman to arrange that for the certainty. (The Treasury auction isn’t likely to move much and when it does, well, that’s the price-the government needs the cash to run; that’s not quite the same as a company who has other possibly viable options, including waiting.)

[0] - https://www.treasurydirect.gov/indiv/research/indepth/res_au...

[shuckles]

Has anyone priced an option to cover the downside risk of an auction? Is it really the expected value of what people leave on the table from an underpriced IPO?

[thedufer]

> 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.

[lethoso]

On what basis do you think it should not be allowed?

[nicoburns]

It's basically a money grab for the people who are allowed to participate in the IPO. And those people aren't providing anything of value in return.