> Why don't they structure IPOs as an auction, such that the initial sale is at the market price.
Why do you think this would work? Google IPOed with a dutch auction, and went on to pop 30% in the first 2 days.
An auction allows you to find a market-clearing price, but does not allow the information-exchange to do proper price discovery, so it doesn't solve the problem. The IPO pop is typically explained as the reward for taking the risk of buying an unpriced asset.
Why do you think this would work? Google IPOed with a dutch auction, and went on to pop 30% in the first 2 days.
An auction allows you to find a market-clearing price, but does not allow the information-exchange to do proper price discovery, so it doesn't solve the problem. The IPO pop is typically explained as the reward for taking the risk of buying an unpriced asset.