Post-Facebook IPOs Leave Money on the Table

There’s a strange new creature on Wall Street: the cautious investment banker. Born of the disastrous Facebook initial public offering, he’s well-groomed, relatively sober (thanks to 2008), and terrified of another flop. In pricing U.S. IPOs this year, he has seemingly underestimated investors’ appetite for new stock. As a result, some companies raising money from the public may have left a lot of cash on the table.

The average first-day return of almost 200 companies that made their debut on public markets in 2013 was 17.3 percent, by far the biggest average “first-day pop” since the late-’90s tech bubble, according to Ipreo, a market intelligence firm. “The banks are pricing conservatively,” says Moshe Cohen, a finance professor at Columbia Business School. “It’s not conservative based on the fundamentals of a lot of these companies, but it is conservative based on the demand for the stock.”