Busy IPO bankers – Good or Bad idea?

When a restaurant gets busy, your waiter covers more tables and you get less attention but perhaps the food is fresher given the high volume, right? Does the same hold for your IPO banker? In a research paper we are presenting in academic circles, Dr. Craig Dunbar and I study ~1700 IPOs and find that that IPO volumes do matter. When IPO markets are busy IPO price ranges are more likely to be adjusted across the board, but when a particular bank is busy it is no more likely to adjust the offering price. However, when busy banks do adjust the range, they adjust prices up (not down) just before the offering, and their IPOs tend to have a greater first day pop. That is, they leave more money on the table — good for investors, not so good for issuers. Two explanations come to mind. Perhaps busy bankers are too busy to adjust the price of their IPOs. Or, when a banker is juggling too many deals it sells them at a discount to reduce its pipeline? In the latter explanation, the issuer is competing with other issuers for the banker’s limited attention. Have you ever been seemingly “rushed” through a meal? Issuers should consider whether to choose an investment bank with too many other deals competing for attention span.