"It is one of the few times outright price manipulation is allowed (which should be a completely different discussion"
I'm curious to know what arguments are in favour of it. If they're incorrectly pricing the IPO, surely they should suffer for it and adjust their pricing models and strategies rather than be allowed to manipulate their way around what's pretty much their own mistake?
I don't know much about how companies go public but it sounds like a good portion of the stock is issued to "investors" at or below the IPO price who then immediately go on to sell that stock to the public when trading is opened? So the downside of pricing the IPO too low is the company won't receive as much for the shares as they could have. Presumably just issuing the shares directly to the public during the IPO seems like the way to capture the best price? Is the problem that the exchange doesn't allow for the issuing of shares, only the trading of shares, so somebody needs to own them first? I'm sure there's a good reason why but what is it?
Simply put, the argument is that the the 'price' of price manipulation is one the market (read: the purveyors of the exchange who get to make the rules) are willing to allow in exchange for an orderly, stable market. IPOs are hectic times, and they want some stability while the dust settles.
I'm curious to know what arguments are in favour of it. If they're incorrectly pricing the IPO, surely they should suffer for it and adjust their pricing models and strategies rather than be allowed to manipulate their way around what's pretty much their own mistake?
I don't know much about how companies go public but it sounds like a good portion of the stock is issued to "investors" at or below the IPO price who then immediately go on to sell that stock to the public when trading is opened? So the downside of pricing the IPO too low is the company won't receive as much for the shares as they could have. Presumably just issuing the shares directly to the public during the IPO seems like the way to capture the best price? Is the problem that the exchange doesn't allow for the issuing of shares, only the trading of shares, so somebody needs to own them first? I'm sure there's a good reason why but what is it?