What is IPO underpricing?

What are the IPO underpricing percentages in the U.S. and other countries?

What are the potential reasons for IPO underpricing?

2. Search the Wall Street Journal or other sources to find two recent IPOs. Estimate the IPO underpricing (if the first day closing price was above the offer price) for those companies. What are the issue size (proceeds raised) for the companies?

3. The Bread.Com Co. just had an Initial Public Offering (IPO). The company sold all the shares to an underwriter at $10 per share. On the day of the IPO, the underwriter sold the common stocks to investors at the offer price of $11 per share. At the end of the offer date, the stocks were traded at $15 per share.

(a) What is the percentage underwriter spread for this stock?

(b) Calculate the percentage of IPO underpricing for the Bread.Com.

4. What is the book-building process for an IPO?