Who do you believe usually wins in most IPOs?

In an IPO, there are different parties involved which comprises of Issuer, banks, Legal counsels,
Issuers Auditors, PR-Agency, and Investors
In an IPO, the banks have the numerous responsibilities like Project Management and Timing ,
Valuation, Coordination of all work streams, Business Due Diligence, Placement and Bookbuilding,
Trading and Roadshows. Their involvement in the IPO process is from the beginning of the project
prior to the kick-off meeting and the merchant banks are largely benefitted from the IPOs and are in a
win-win situation.
Here is a deal for banks working on IPOs: Price the new stock high, get a bigger fee. Price it low, get
free shares of the company.1
A large IPO is generally underwritten by a syndicate of investment banks, the largest of which is the
lead underwriter. So, the lead underwriters win by gaining from Underwriting spread. It is the
difference between the amount paid by underwriting group in a new issue of securities and the price
at which securities are offered for sale to public. It comprises of managers fee and Underwriting fee.
To illustrate this, lets look at the case of eToys IPO2 in 1999 where Goldman Sachs was the key
issuing bank.

This example illustrates that by valuing the company little more over the actual valuations, banks
make big gains as the commission fee (here 7%) is over the actual profit made in the IPO, rather than
a straight figure of commission amount.
Also, there comes a provision of ratchet which is an anti-dilution provision which gives investors
extra shares to recompense for a lower IPO price, but it attenuates the stakes of other shareholders,
comprising of employees and company founders. (Used by J.P. Morgan and Goldman Sachs in
Square deal3)

1 http://www.wsj.com/articles/the-no-lose-bet-for-banks-in-ipos-1450402900

2 http://blogs.reuters.com/felix-salmon/2013/03/11/where-banks-really-make-money-onipos/

3 http://www.wsj.com/articles/the-no-lose-bet-for-banks-in-ipos-1450402900