| 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. |