the point of an auction
In a cogent piece of analysis on News.com, Gregory Rosston explains the point of the Google IPO auction process:
Press reports on the day of the IPO will focus on the offering price and the bounce that “lucky” IPO buyers get. If the bounce is close to zero, that would be bad, according to the popular press. But the press is wrong. In fact, a bounce of zero would signify a resounding success, because it would mean the shares have been priced correctly.
If there is a large immediate bounce, then Google and its investment bankers did not do their job in designing an efficient auction mechanism. The profits gained by IPO shareholders would cost existing Google shareholders dollar for dollar.
See also, via Kottke, this post from marginalrevolution.com, with an explanatory chart from the Times.