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Research suggests that prices go up on the first day for 75% of the issues. These...

Research suggests that prices go up on the first day for 75% of the issues. These IPOs are called Hot IPOs. How would you explain why companies leave money on the table?

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Answer #1

Leaving money on the table is the term that the price of IPO trades at a higher rate than offered by the company. No company would like to leave money on the table.However the exact pricing of the company worth is not possible. The valuations are subjective and tend to be perceived differently by different people.

Adding to this is the Euphoria of the IPO. No one wants to miss out. This raises the prices even more. The investor behavior comes in play here. However many IPO's would go on to underperform in the long run.

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