[YZF]

I believe that usually the underwrites have buyers for all the stock prior to the IPO. The only reason they intervene to keep a stock from plummeting is to secure their own profits as they usually get options on the stock as part of the IPO deal. Talk about conflict of interest. Obviously a lot of the buyers are funds managed by other investment banks. Again talk about conflict of interest. What was the story the other day, that GS didn't record a single day of trading loss for an entire year...

That said, most of the money still does end up in the company which can use it to build its business. The process isn't completely broken. But it's very inefficient.