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Reference.org
IPO underpricing algorithm
open-in-new
<p>IPO underpricing is the increase in stock value from the <a href="/facts/Initial_public_offering/2NntDhrG">initial offering price</a> to the first-day closing price. Many believe that underpriced <a href="/facts/Initial_public_offering/2NntDhrG">IPOs</a> leave money on the table for corporations, but some believe that underpricing is inevitable. Investors state that underpricing signals high interest to the market which increases the demand. On the other hand, overpriced stocks will drop long-term as the price stabilizes so underpricing may keep the issuers safe from investor litigation. </p>