Underpricing

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Underpricing

Issuing securities at less than their market value.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Another argument suggests that investment banks would underprice to create excess demand for an issue that could garner them praise and attention as well as future business from these investors.
For these reasons, the demutualizing firm is expected to underprice its issue, which would make positive initial returns more likely for these influential policyholders.
These converted firms underprice their offerings by a greater degree.