Don&#x27;t forget that the investment bank buys a portion of the IPO for themselves that they sell off later.  If the fee is 7% of proceeds and the pop is 60%, then retaining anything above 12% of the IPO would leave them making more from the pop than the IPO.<p>Secondly you have to look at the agency problem.  The investment bank earns 7% fees, but the investment banker does not.  However the people the investment banker sells the IPO to makes the full pop.  And that list these days often includes a nice chunk for &quot;friends and family&quot;.  Nobody admits to kickbacks, but it is not hard to structure a deal where it is not in the investment banker&#x27;s personal interest to act in the interest of the company going public.<p>Truth be told, I haven&#x27;t paid much attention to this for a while.  But look at <a href="http:&#x2F;&#x2F;www.econ.yale.edu&#x2F;~shiller&#x2F;behfin&#x2F;2002-04-11&#x2F;loughran-ritter.pdf" rel="nofollow">http:&#x2F;&#x2F;www.econ.yale.edu&#x2F;~shiller&#x2F;behfin&#x2F;2002-04-11&#x2F;loughran...</a> for an analysis of this issue during the dot com era.  Their conclusion was that investment bankers were clearly NOT operating in the best interests of the companies going public.