Initial public offerings (IPOs) are usually ________ relative to the levels at which their prices stabilise after they begin trading in the secondary market.

Question

Quizplus · Accepted Answer

Typically, IPOs are underpriced, meaning their offer price is set lower than what the market is willing to pay on the day of the IPO. This is done to ensure a successful launch and to give early investors an immediate profit. As a result, IPO prices often spike on the first day of trading, sometimes doubling or tripling in value. However, over time, the price tends to stabilize to a more sustainable level.

Initial Public Offerings (IPOs) Are Usually ________ Relative to the Levels