ANALYSIS: Innovation May Make IPO ‘Price Pops’ Fizzle Out

The problem? Big IPO first-day price pops. The solution? Well, companies are still working on that.

Direct listings are slowly becoming more popular, in part to limit large first-day price increases, known as “price pops.” But the real innovation in recent months has been in the pricing of traditional IPOs. Hybrid auctions and other alternative methods of pricing and distributing IPO shares are quickly gaining traction. These new pricing mechanisms may soon threaten the established underwritten IPO model.

IPOs Versus Direct Listings

When a company goes public, many pre-IPO shareholders cringe at the type of price pops that get ordinary ...