Underwriters typically try to overprice the initial public offering.

Question

Quizplus · Accepted Answer

Underwriters have a vested interest in setting the stock price at a level that will result in a successful offering and a high demand for the stock. If the stock is overpriced, it may result in a lack of demand and a failed offering. Underpricing the stock may also benefit the underwriters by generating positive publicity and encouraging future business, but it ultimately benefits the company and its shareholders.

Underwriters Typically Try to Overprice the Initial Public Offering