Comment by seizethecheese

Others have mentioned that a soaring price after IPO means that the company was undervalued. What I don't understand is why the mechanism for IPOs hasn't changed to better capture the correct value. Why couldn't a company auction blocks of shares instead of having to set a specific price? My understanding is that companies have a guaranteed floor on valuation by the bank helping them go public, but this could certainly co-exist with some sort of auction format.