The IPO process is pre-Internet and that needs to change ASAP. With the tech IPO window open we are once again being treated to the maddening spectacle of the opening pop in which the first trade price is massively above the IPO price. All sorts of theories are proffered for why that is rational and the right thing to do. It isn’t.

In the year 2016 here is how a company should go public. The company, with the help of banks, brokers and the exchange should build a complete buy and sell order book. The IPO price and the opening trade should be one and the same. To help facilitate this, the float should be meaningful, requiring both a primary and secondary component to the IPO.

With the Internet there is no excuse for doing it any other way. Yes, once upon a time information dissemination and gathering were expensive and trading was slow. But today neither one of those conditions applies any more. So why are we still doing IPOs the old, pre-Internet way? Because investment banking is a highly concentrated industry which benefits massively from the status quo, as do a select group of investors.

In the absence of a competitive solution, regulators  should mandate a larger initial float which will force building a complete book. If there is no market clearing price, well then the IPO doesn’t happen (this takes care of the “but we also buy the bad companies” non-argument — bad companies should *NOT* go public).

As part of this change we should also get rid of the private road show. The company should hold multiple public streaming sessions and take questions (known as an earnings call once a company is public). Again, in the age of the Internet there is exactly zero reason to have private discussions prior to an IPO, which is supposed to be an “initial *public* offering — otherwise we should call it what it currently is: "BCD” - best club deal.