Update – It was actually Bank of America that led the syndicate so I made changes below. As usual, making no friends with this personal inside baseball account of things…the banks are quick to point out that Tubemogul is in ad tech and ad tech is a hated industry…blah blah blah. I guess we will know more in time. Of course Tubemogul could have walked away from the IPO, but let’s be honest, the momentum of the deal was too far underway…I assume the bankers used this ploy against Tubemogul but have NO proof of it.

I had the priviledge of attending the opening bell ringing for the Tubemogul IPO ($TUBE) a few weeks back at the Nasdaq.

As everyone celebrated the moment, I was extremely agitated. You see, the IPO had been priced at $11-$13 and a day before the IPO, Bank of America dropped the price to $7. For those keeping score, that is a 40 percent haircut give or take. Had the business changed all of a sudden? NO. Was the Nasdaq crashing? NO.

Bank of America will tell you that the market was shaky and there was no demand for this IPO. Wierd in that the insiders themselves and VC’s were willing to pony up a lot of capital at that price themselves:

Because of the quiet period leading up to the IPO, I am not privy to any of the real play by play and why Bank of America led such a horrible process. Was the road show on Pluto?

When I heard about the price being dropped to $7 I scrambled to buy more shares for my fund (I did so in real time on Stocktwits). Of course, with no account at Shittybank or Bank of America, I had zero chance. The easy money was going to go to their clients here. I called Morgan my broker who could not track any down last minute. I asked Morgan to buy me 20,000 more shares up to $8, but I knew standing at the Nasdaq that I had no chance.

Sure enough, the stock opened at $9. A massive misprice. From $9, the stock ran to $11.70.

From the outside this looks like no harm no foul…

IT IS NOT!

The Company did not raise the capital Bank of America and Citibank should have easily raised at the first indicated price range. They (Bank of America and their syndicate) did NOT do their job! The Company ends up with a lot less money as they were not willing to dilute at such a low price.

As for Bank of America and Citibank…they get paid and paid well. Most favored clients of these banks also got paid very well on the initial pop of $7 to $11 who most likely flipped out and left us regular market people to buy the stock that the syndicate was supposed to place.

In the year 2014, this slippage is an abomination.

If you are an angel investor today, have you factored in this incredible slippage that could happen even in your winners?

Google did a ‘dutch auction’ IPO way way back for their IPO. They were not for sale to the banks. It was a genius move. They have never looked back.

Facebook let Goldman Sachs purchase their IPO. It almost backfired, but for the execution of the Company. Good for them, but it really set back the potential for a change in the way IPO’s are done.

I feel like I paid a horrific tax to Citibank. I thought I had already paid them in TARP.

If you see a banker today, please punch them. If you see a Citibank banker, punch them twice.