underpriced deliberately in order to boost demand and encourage investors to take a risk on a new company.In any case, the IPO is considered underpriced by the difference between its first-day closing price and its set IPO price.discovery than price continuation. If positive (negative) underpricing occurs after the. offer price is set below (above) the intrinsic value, underwriter's pricing error is. reversed by the market, which means the market is in a more rational state than when.While it is well documented in the literature that IPOs have been consistently underpriced on average of 15% or more over the past three decades all over the world, the recent seminal study by Purnanandam and Swaminathan report that IPOs are overvalued at the offer price relative to value metrics based on .