In Snowflake's Wake, Unity Preps a Unique Debut
"No, higher," Elon Musk told investment bankers ahead of Tesla's (NASDAQ: TSLA) IPO in 2010, balking at the $15 offering price that they recommended. Most company executives defer to the bankers that they've hired when it comes to valuation matters, but Musk needed as much capital as possible to fund the electric-car maker's burgeoning operations. The eccentric billionaire insisted on an offering price of $17, threatening to call off the deal unless he got his way -- and won.
The anecdote illustrates the opposing forces at play in traditional IPOs, where companies want higher prices in order to maximize the deal's proceeds but investment bankers prefer to engineer a pop on the first day to reward the (predominantly institutional) investors that buy in. It's a delicate balance, one that has only grown more contentious over time, which is in part why many companies have been increasingly exploring alternative paths to the public markets in recent years, such as direct listings or special-purpose acquisition companies (SPACs).
The traditional IPO process has come under fire in recent years. Image source: Getty Images.
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