An auction for IPO price is much easier to manipulate and can lead to much volatility. Pre-allocating to the entities that are not expected to sell quickly or participate in pump-and-dumps (pension funds, etc.) is considered a better long term strategy for the company, as the sister comment says.
Didn't Google solve this with their dutch auction?
Yes. But Google being Google it got top notch planning advice from world class auction experts that Goldman pulled in to advise them on the IPO.
Most companies without such expert advice could step into some pitfalls. Just a guess, I am not an expert, but if my company were doing an IPO I would prefer it not to play financial games to eke out a percent of IPO price and instead focus on long term price stability to become a solid stock. My 2c.
Figma's stock quadripled in price from 33 to whatever it is now. Not saying it's good or bad, just that those gains must have been nice with effort akin to staring spreadsheets a while and babbling in meetings.
What makes an auction easier to manipulate or more volatile than a stock traded on the market?
Likely nothing once the stock is actually trading with some history. But for initial placement wall-street-bets action could be very disruptive.
The company wants to avoid sharp drops after the IPO, as those encourage employees to get out ASAP, which increases the volatility and discourages large, stable investors.