1 year ago
Wall Street IPO Pricing Under Scrutiny After Strong Debuts
When companies first sell their stocks to the public (called IPOs), they often try to set a price.
Recently, many of these stocks have jumped up in price on their first day of trading, meaning the company could have asked for more money.
Experts think this might be because banks are being too careful, especially with the economy and how much regular people are willing to invest.
A few companies like Figma and Circle had huge price increases on their first day.
Some people think the current system of selling stocks to the public is flawed.
While some companies have tried different methods to go public, like putting their stocks directly on the market, the traditional way remains popular.
The market for new stock offerings is expected to be very active soon.
Recent IPOs saw significant first-day gains, prompting questions about conservative pricing.
The 20 largest U.S. IPOs this year averaged a 36% first-day pop.
Analysts suggest a 15-20% rise is the ideal range for rewarding investors without underpricing.
Banks are cautious due to market volatility, economic uncertainty, and fluctuating retail demand.
Alternatives to traditional IPOs, like direct listings and SPACs, struggle to gain significant traction.
- Who
- Wall Street banks, companies like Figma and Circle, and various analysts.
- What
- Questions arise over cautious IPO pricing by Wall Street banks due to strong market debuts.
- Where
- United States
- When
- Recent IPOs have seen big first-day gains in 2025.
- Why
- Banks are being cautious to avoid market flops amid economic uncertainty and fluctuating demand.
Issuers Perspective
Underwriters Perspective
Pricing Strategy
Issuers Perspective
Companies potentially miss out on raising more capital when IPOs are priced conservatively.
Underwriters Perspective
Conservative pricing builds positive momentum and long-term brand equity for issuers in a volatile market.
Key facts
- Average First-Day Pop (Top 20 IPOs)
- 36%
- Ideal Rise Range
- 15-20%
- Potential Missed Proceeds (If Priced Higher)
- $6.1 billion
- Companies Mentioned
- Figma, Circle, Bullish, Klarna, Gemini, Medline
- Renaissance IPO Index 2025 Growth
- 15%
Quotes
Lukas Muehlbauer
Research analyst at IPO research firm IPOX
“In today's market, conservative IPO pricing is a strategic choice designed to build positive momentum and long-term brand equity (for issuers)”
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Phil Haslett
Co-founder of EquityZen
“IPO pops are a reminder that the process remains broken”
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Tomasz Tunguz
Founder of venture capital firm Theory Ventures
“The IPO market's basically been closed for three years. So if you're an investment banker, you don't know what the demand is”
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Mike Bellin
IPO services leader at PwC U.S.
“The traditional IPO path is just more tried and tested, and more people understand it than a direct listing”
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Maria Palma
General partner at Freestyle Capital
“If I were IPO-ing my company right now, I probably would do it the way that people have been doing it, even if I know there's a mispricing risk”
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