Hacker News Reader

Thanks for the insightful explanation, though I am wondering about the practice of creating the artificial "pop" when IPO opens, why is this kind of premeditated pumping allowed?

View on HN

The large institutional investors will not participate unless there is something for them. There's a lot of shadiness all around, but essentially you are asking funds to sink tens or hundreds of millions of dollars into a new company which may be very risky. As a result, the baked-in pop gives those investors some assurance that they won't lose their shirts.

At the end of the day, the company needs to receive cash from somewhere and the banks don't want to carry the risk, so they offload it to their customers (who front the cash), and they essentially offload it to the public.

Reply on news.ycombinator.com