When DoorDash and Airbnb went public last week, investors rallied around the stocks, sending them 86% and 112% respectively. But Imishop Khan, CEO of Verishop, said the public debuts showed an extreme level of incompetence among their investment bankers.
“The last couple of IPOs, as they have worked, seem like an epic level of banker incompetence,” Khan said Tuesday on CNBC’s Squawk Alley. Khan led Snap through its IPO as chief strategy officer and previously worked in investment banking at JPMorgan and Credit Suisse, where he floated Alibaba.
“Obviously someone wasn’t focusing on what was going on in the customer’s mindset,” he said. “When the market is very busy, bankers often focus on doing business and customer management rather than getting their jobs done. As a result, people have this conversation and a lot of people lose confidence in the IPO process.”
The public offers sparked a debate over the traditional IPO process, with critics looking at the money left on the table. Airbnb has valued shares at $ 3.5 billion each at $ 68 each, while DoorDash has its IPO at $ 102 per share and raised $ 3.37 billion.
Khan said that while he doesn’t believe the entire IPO system is broken, the people working on it could do better. It’s a similar argument made by Jim Cramer last week who criticized investment banks for failing to properly account for the “new cohort” of younger investors when pricing IPOs.
“I don’t mean to say the market is broken, but the process of how we do this business is definitely broken,” he said, adding that it was “embarrassing” work being done by the financial firms that were on it work the IPOs.
In a Squawk Box interview Tuesday, Goldman Sachs Chairman and CEO David Solomon defended the IPO pricing process. The investment bank has developed a “much more transparent” system that allows companies to get real-time information about market demand.
“I think one of the things that is not well understood is that companies themselves choose their investors in this regard. They have much better transparency than five or ten years ago about the decisions they want to make,” said Solomon. “But despite these decisions, it is very, very difficult to control and very difficult to consider whether people will come into the after-market and buy the stock and further increase the share price.”
– CNBC’s Kevin Stankiewicz contributed to this report.