Introduction:
The underpricing is a short run anomaly characterizing the IPO market. This
phenomenon has inspired a large theoretical literature over decades trying to give a relevant
and a convincing explanation to this first day phenomenon. Underpricing anomaly has
intrigued academics and practitioners over the past three decades and has generated
considerable research aimed at explaining the apparent incongruities with rational asset
pricing. While this research effort has provided numerous analytical advances and empirical
insights and a large list of explanations were presented, it is fair to say that this anomaly is not
satisfactorily resolved. It is still a puzzle sparking much academic attention until now and
requiring other explanations and much considerable research effort.
In this first section, I begin in the first paragraph by a definition of the underpricing
anomaly and an illustration of its persistence over the time, all over the world and for all the
industries, an order to have a complete idea about this phenomenon. I summarizing in a
second paragraph the most important results and findings reached by the researchers that have
been interested in this field and have been interested in explaining the short run IPO puzzle.
These findings can be classified in two main categories:
Explanations based on informational asymmetry between the key parties which have
been considered the most convincing explanations for decades by a large number of
researchers.
And theories asserting the informational transparency and lucidity and asserting the IPO
market efficiency.