Originally posted as a Twitter thread on August 28, 2020

There’s been a lot of misinformation about IPOs — particularly around the narrative of “intentional underpricing” and subsequent IPO pops / “money left on the table.” IPOs aren’t perfect, but the problem isn’t the pop — a sideshow caused by quirky supply/demand imbalances.

The things to fix are aggregating the most demand, blurring the lines between private and public for a seamless transition to being public, and more thoughtful lockup releases, while also ensuring that a company is sufficiently well capitalized.

Many are celebrating SPACs and Direct Listings, which both have their place as valuable tools, as the “death” of the IPO *because* of a misunderstanding of what causes a pop. A price without a quantity is not a price: block sales happen at a discount, M&A at a premium.

But today, an IPO remains the best way to raise a large block of primary capital. It *should* improve, but the way to measure improvement is not pop against low float, but on aggregation of the most demand (*all* investors) in a way that sufficiently capitalizes the company.

There’s a lot more data and examples to back this up in this piece which @skupor and I put together. It’s long but hopefully shows exactly the dynamics and game theory in play around how a company goes public and what’s in a price:
https://a16z.com/2020/08/28/in-defense-of-the-ipo/