The valuation of initial public offerings in knowledge intensive industries

A large amount of research has examined the occurrence of initial public offering (IPO) market anomalies. Much of the research on the topic has looked for explanations of the phenomenon of IPO `underpricing´. The vast majority of IPO offerings experience an upswing in share price during the first 24 to 48 hours of trading. As a result, a positive return on investment is observed. Several researchers have found that the degree of underpricing varies from period to period, forms a cycle of high and low or hot and cold, and also varies from industry to industry. In this paper, the authors suggests that the underpricing phenomenon can be understood without the intentional action of underwriters to underprice the IPO offering below its true value. He argues that underwriters attempt to price the LPOs on average at the full information value