Underpricing is the practice of listing an initial public offering (IPO) at a price below its real value in the stock market. When a new stock closes its first day of trading above the set IPO price, the stock is considered to have been underpriced. This often happens when there is high demand for a particular stock and not enough supply. While this may seem like a good thing for investors, it can actually be quite risky.If you buy shares in an IPO that's underpriced, you may not be able to sell them right away at a profit because it takes time for the market to catch up to the true value of the stock. So while underpricing may seem like a way to get ahead in investing, it's important to remember that there are risks involved.
