IPO Surges Seen as Investment Banker Failure

Devina Mehra, who started a company called First Global, said something interesting about IPOs.

When a new stock starts trading much higher than its IPO price, people might think the company and its bankers did a great job.

But Mehra says this is actually a sign that the bankers didn't get the best price for the company.

She explained that bankers are paid based on how many deals they do and how much money they raise, not on how the stock does after the IPO.

So, their goal is to set the highest possible price for the shares, not to make sure the stock does well later.

This means that if a stock goes up a lot after the IPO, it shows the bankers could have set a higher price initially.

Mehra's comments come as many recent IPOs in India have had smaller gains when they first started trading, with an average gain of 5%.

After listing, these stocks have given an average return of 7%.