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 ?
IPO underpricing positively correlates to analyst coverage after the IPO.
However, none of those studies examine the double-stage relation between underpricing and liquidity created by two subsequent effects: 1) underpricing generating greater analyst coverage and 2) the additional coverage triggered by underpricing improving liquidity and reducing information asymmetry in the secondary market.
The following two sections apply a signaling perspective to develop theory and hypotheses that link board ownership, underpricing, and liquidity.
Indeed, both retained director equity and underpricing have conventionally been considered to be important signals at the time of an IPO.
Ben slama et al (2011) and Kanoun and Taktak (2013) examine the relationship between underpricing and discount.
In the primitive stage, we assert that underpricing is more likely to happen.
The empirical evidence posits that the IPO firms experience underpricing in the short-run and over the long-run their performance deteriorates.
The offer price appears to be approximately set correctly for the time in which the stock went public due to the amount of underpricing that occurred.
They attribute much of the higher underpricing during the bubble period to a changing issuer objective function.
Underpricing is higher for firms with elevated preoffer levels of cash, which is consistent with market timing predictions.
We report record levels of SEO underpricing never measured before, particularly in the year 2009 when 270 SEOs had an average level of underpricing of 6.