When Stocks Soar on Day One

An IPO pop is when a company’s stock price jumps significantly (20-100%+) on its first day of public trading, creating instant wealth for early investors but signaling that the company left money on the table.

Famous IPO Pops

Snowflake (September 2020):

• IPO price: $120
• First-day close: $253 (111% pop!)
• Largest software IPO ever
• Berkshire Hathaway bought in (Warren Buffett’s first cloud investment)

Airbnb (December 2020):

• IPO price: $68
• First-day close: $144 (112% pop)
• $100B+ valuation in pandemic (ironic for travel company)

Coinbase (April 2021):

• Reference price: $250
• First-day close: $328 (31% pop)
• Direct listing, not traditional IPO
• Peak crypto bubble

Facebook (May 2012):

• IPO price: $38
• First-day close: $38.23 (0.6% pop — RARE FAILURE)
• Technical glitches on NASDAQ
• Traded below IPO price for over a year

Google (August 2004):

• IPO price: $85
• First-day close: $100 (18% pop)
• Used Dutch auction to reduce pop (didn’t fully work)

The Economics

Why it happens:

• Investment banks intentionally underprice IPO
• They allocate shares to favored clients (hedge funds, institutions)
• Those clients flip shares on day 1 for instant profit
• Retail investors (regular people) buy at inflated prices

Who wins:

• Banks’ favorite clients (instant 50-100% returns)
• Investment banks (happy clients come back)

Who loses:

• Company (left billions on table — could have raised at higher price)
• Employees (shares now worth less than they could have been)
• Retail investors (buy high, often lose money)

Bill Gurley’s Criticism

VC Bill Gurley called IPO pops “a feature, not a bug” — banks enrich their clients at companies’ expense. He advocated for direct listings (Spotify, Coinbase model) to avoid this.

2020-2021: Peak IPO Mania

DoorDash (Dec 2020): 86% pop ($102 → $189)
Bumble (Feb 2021): 63% pop
Roblox (Mar 2021): 54% pop
Robinhood (Jul 2021): -8% pop (DOWN on day 1, rare embarrassment)

The Shift

Direct listings and SPACs emerged as alternatives to avoid IPO pops and banker fees. But by 2023, most companies returned to traditional IPOs despite the money left on table.

Sources: IPO Scoop, Renaissance Capital IPO Data