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Definition of 'Underpricing'
The pricing of an initial public offering (IPO) below its market value. When the offer price is lower than the price of the first trade, the stock is considered to be underpriced. A stock is usually only underpriced temporarily because the laws of supply and demand will eventually drive it toward its intrinsic value.
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Investopedia explains 'Underpricing'
It is believed that IPOs are often underpriced because of concerns relating to liquidity and uncertainty about the level at which the stock will trade. The less liquid and less predictable the shares are, the more underpriced they will have to be in order to compensate investors for the risk they are taking. Because an IPO's issuer tends to know more about the value of the shares than the investor, a company must underprice its stock to encourage investors to participate in the IPO.
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Search results for 'Underpricing'
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http://www.investopedia.com/university/ratios/investment-valuation/ratio5.asp
This ratio is a refined version of the P/E ratio, and it gives investors insight
into the degree of overpricing or underpricing of a stock's current valuation. ...
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http://stocks.investopedia.com/stock-analysis/2011/Is-There-Still-Time-To-Play-The-Rebound-In-Sanderson-Farms-SAFM-PPC-TSN-IBA-BWLD0526.aspx
... Unfortunately, though, the move off the bottom has already taken up some of that
underpricing and the shares aren't really priced at a level that makes them a ...
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http://www.investopedia.com/articles/tax/09/calculate-property-tax.asp
... As this method is being used it is important to look at overpricing, underpricing,
the location of the property and the overall state of the property. ...
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http://www.investopedia.com/articles/mortgages-real-estate/08/home-seller-mistakes-selling-house.asp
... market value. In fact, underpricing your home a bit can actually be a strategy
to generate extra interest in your listing. (Read ...
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