aswathdamodaran.blogspot.com · 2019-10-18 · 2421d

Musings on Markets: Disrupting the IPO Process

This article examines the traditional banker-led IPO model versus direct listings, arguing that investment banking services have become less valuable as market conditions have changed. The author contends that large, well-known companies should consider direct listings to avoid underpricing losses, while acknowledging that smaller companies may still benefit from banker guidance.

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Metrics in this report

IPO Underpricing

15percent

median

Median price jump from IPO offer price to first-day closing price

Investment Banking Fees

3-8percent

range

Banking fees as percentage of IPO proceeds; higher percentages for smaller issuers

Post-Money Valuation at IPO

700million USD

median

Median post-money market cap of IPOs in 2019, per EY

Specific IPO Underpricing Example - Beyond Meat

84percent

Price jump from offer to first day of trading

Specific IPO Underpricing Example - Zoom

72percent

Stock price jump from offer price to end of first trading day

Uber IPO Banking Fees

105million USD

Total banking fees for Uber IPO; Morgan Stanley claimed approximately 70% of these fees