Underpricing


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Related to Underpricing: IPO

Underpricing

Issuing securities at less than their market value.

Underpricing

Describing a situation in which a company prices an IPO lower than its market value. This results in the company raising less capital in the IPO than it could have raised. There is no definite way to determine if a stock issue is underpriced until it is too late and the price of the first secondary trade is much higher than the IPO.

underpricing

The pricing of a new security issue at less than the prevailing price of the same security in the secondary market. Underpricing helps ensure a successful sale.
References in periodicals archive ?
Con lo anterior se busca determinar el underpricing u overpricing de las empresas y su rendimiento en el corto y largo plazo.
Se procedio a determinar si la accion de la empresa analizada contaba con underpricing, overpricing, o no presentaba rendimiento.
There are also evidences showing that IPO underpricing is used as a marketing tool.
In the primitive stage, we assert that underpricing is more likely to happen.
The relationship between the proportion of the independent board members and underpricing is negative as expected.
To gain an understanding why IPOs on average need to be underpriced, and alternative explanations to the underpricing phenomenon it may be good to start with introducing the parties involved in the IPO.
Prior research has provided evidence in support of underpricing which seems to exist in all countries.
IPO underpricing positively correlates to analyst coverage after the IPO.
The best established theories of underpricing are the asymmetric information based models and the behavioral (investor sentiment) models.
The following two sections apply a signaling perspective to develop theory and hypotheses that link board ownership, underpricing, and liquidity.
Baron (1982) argues that underpricing is explained by the asymmetric information between the issuer and the investment banker who is better informed than the issuer.
However, despite the importance of the relationship between corporate governance and underpricing, to the best of author's knowledge the issue has not been empirically validated in case of Pakistan.