Key Facts
• A study suggests US IPO underpricing criticism may be exaggerated.
• Research analyzed over 30 years of market data by Northeastern and Maryland universities.
• IPO underpricing scale could be up to 40% smaller than previously assumed.
• Day-one surges often driven by a small group of enthusiastic investors.
• Example: Figma’s IPO price tripled on its first trading day in July 2025.
• Circle Internet Group and AIRO Group saw over 100% increases on their IPO days.
• Only 10% of offered shares are typically traded on IPO day.
• Researchers argue IPO market is not entirely dysfunctional despite price volatility.
• Wall Street debates if IPO prices are set too low compared to market demand.
Summary
A recent study challenges the notion that US IPO prices are significantly underpriced, suggesting the scale of underpricing may be overstated by up to 40%. Researchers attribute day-one price surges to a small group of highly enthusiastic investors, likening their behavior to fans overpaying for concert tickets. Notable examples include Figma, whose stock price tripled on its first trading day, and other companies like Circle Internet Group and AIRO Group, which saw over 100% increases. Despite these surges, only 10% of offered shares are typically traded on IPO day, indicating that the perceived price jumps may not reflect broader market trends. The findings reignite debates on whether Wall Street undervalues IPOs relative to market demand, though researchers argue the IPO market remains functional overall.
