Workday soars on first day of trading, reminding us of the other way IPOs fail

Workday’s IPO exploded out of the gates on Friday, debuting on the New York Stock Exchange at $48.05 and rising to $49.75. Up a whopping 78.2 percent on the first trading! High fives all around! Happy days are here again!

All of which reminds me of just how dumb we still are when it comes to IPOs.

The valley still lusts for these big first-day debuts, hoping against hope for a return to the dot-com days. But it should be noted amid the clamor, that Workday failed, though in the opposite way that Facebook’s IPO failed earlier this year.

In that case, Facebook overestimated the demand the value of its stock. It overpriced and over-allocated the number of shares. Bankers had to buy it furiously on the first day of trading to keep it from falling below the offering price. Embarrassing.

In the case of Workday, the company and its bankers dramatically underestimated demand. They allocated too few shares at too low of a price.

Consider, the numbers:

“The Pleasanton-based successor to PeopleSoft sold nearly 28 million shares Thursday for $28 each — higher than the company had indicated just two days before. The IPO pumped at least $637 million into the company’s coffers and establishing an initial valuation of about $4.5 billion.”

Sounds good, right? Except, the stock debuted at $48.05. That means that the company and its bankers left $561.4 million on the table. They could have raised the same amount of money by selling fewer shares. Or, they could have raised more by pricing it better. Instead, that money went into pockets of people who were fortunate enough to be clients of the banks who doled it out at $28 per share.

Now, with the good vibes, don’t be surprised if the company comes around in a few months with a secondary offering of stock to try to leverage the impression that’s been created today: The market is hungry for Workday stock.

Still, it’s astonishing to me that despite the logic, and all the lessons learned, we still look at these big first-day trades as the way we define successful IPOs. It seems some lessons, we just can’t seem to learn.

UPDATE: The stock closed at $48.69.