Question

Provide two arguments in favor of IPO underpricing and two arguments against IPO underpricing.

Answer 1

Two arguments in favour of initial public offering under pricing-

A. It will help potential investors to enter at better price into the company and at will be a value deal.

B. It will also be helpful in order to generate large amount of interest for subscription of the shares in market.

Two arguments against initial public underpricing-

A. it will be detrimental to the interest of those stakeholders who are trying to sale off their securities in the initial public offer.

B. It will also be reflection of a bad strategy which has been adopted by the underwriter in order to gain from initial public offering.