The Journal has a nice article about the problems with IPOs. First, there's an almost total lack of transparency in process. Second, obtaining shares at IPO is extremely difficult - this ensures that an artificial scarcity forces prices up, and small investors get overvalued shares which then fall in price.
"...underwriters continue to dole out most IPO shares to their big institutional clients or super-wealthy private banking customers -- a practice that remains perfectly legal today. If there's a coveted IPO, the shares that otherwise would have gone to executives will likely be snatched up by institutional investors, because they spend more money with brokerage firms."
It's well studied financially that most IPOs experience a sharp drop in the few days following the IPO - but the guys that make the money are the ones that get shares doled out to them by the banks and brokerages. Who are they? Naturally, their biggest customers.
Did you think this got fixed in the last few years? Think again - this problem is part of the reason why everyone's
scared to IPO. No one wants to test a broken system.