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    Under pricing in public offerings of common stock

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    In the UK, initial public offerings of common stock are usually sold by an offer for sale. Mr. Beam has observed that on average these stocks are under-priced by about 9% and for some years has followed a policy of applying for a constant proportion of each issue. He is therefore disappointed and puzzled to find that this policy has not resulted in a profit. Explain to him why this is so.

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    https://brainmass.com/business/initial-public-offering/pricing-public-offerings-common-stock-43410

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    The principle that has been illustrated is that of winner's curse. When individuals bid for a common-value object, the winner is likely to pay more than what the object is worth (winner's ...

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    The solution discusses under pricing in public offerings of common stock.

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