IPO boom shows ‘epic level of incompetence’ from bankers

When DoorDash and Airbnb went public last week, investors rallied around the stock, taking them up 86% and 112% respectively. But Verishop’s CEO, Imran Khan, said the public debuts were extremely inept with their investment bankers.

Khan led Snap during its IPO as Chief Strategy Officer and previously worked in investment banking at JPMorgan and Credit Suisse, where he helped Alibaba disclose.

“The last few IPOs, with the way they worked, seem like an epic level of bankers’ incompetence,” Khan said on CNBC’s “Squawk Alley on Tuesday.”

“Obviously someone wasn’t focusing on what was going on in the customer mindset,” he said. “When the market is very busy, bankers are often really focused on chasing deals and customer management, rather than doing their job. As a result, people have this conversation and many people lose confidence in the IPO. . “

The public offers rekindled a debate around traditional IPOs, with critics looking at the money still on the table. Airbnb priced shares at $ 68 each for a haul of $ 3.5 billion, while DoorDash cost its initial public offering at $ 102 a share and raised $ 3.37 billion.

Khan said that while he doesn’t think the overall IPO system is broken, the people working on it can do better. It’s a similar argument made last week by CNBC’s Jim Cramer, who criticized investment banks for not properly taking into account the “new cohort” of younger investors when pricing IPOs.

“I’m not saying the market is broken, but the process of how we close these deals is absolutely broken,” he said, adding that it was “shameful” work being done by the financial firms working on the IPOs.

In a “Squawk Box” interview on Tuesday, Goldman Sachs Chairman and CEO David Solomon defended the process of IPO pricing and said the investment bank has developed a “much more transparent” system that allows companies to obtain real-time information. about market demand.

“I think one of the things that is not well understood is that the companies themselves choose their investors in the context of this. They have a lot more transparency than they would have had five or ten years ago about the choices they want to make around this. , ”’Said Solomon. “But despite making those choices, when people go to the aftermarket to buy the stock and keep increasing the stock price, that’s something that’s very, very difficult to control and very difficult to think about.”

– CNBC’s Kevin Stankiewicz contributed to this report.

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