The Phenomenon of IPO Underpricing in the European and U.S. Stock Markets

The Initial Public Offering (IPO) marks one of the most important events of a company. Basically, the aim is to generate maximum proceeds by selling the company’s shares to investors. However, the shares that are sold seem to be underpriced as the price significantly soars on the first trading day. Since the very first detection of this phenomenon in the United States in 1969, several subsequent studies have documented the existence of worldwide IPO underpricing.

This study focuses on IPO Underpricing in the European and United States Stock Markets by outlining and discussing the following essential issues:
What is underpricing in the context of the IPO?
Which motivations are there and how do they impact?
Is there IPO underpricing in the markets of Europe and the United States of America?