Arguments that have been presented to support IPO underpricing include diminishing the risk to
the underwriter who has agreed to a ﬁrm commitment underwriting.

Question

Quizplus · Accepted Answer

IPO underpricing can provide a safety net for the underwriter who has committed to purchasing a certain amount of shares from the company going public. Underpricing the shares can help ensure that the underwriter is able to sell them to investors and not be left holding unsold shares. This reduces their risk in the underwriting process.

Arguments That Have Been Presented to Support IPO Underpricing Include