What is underestimated?

is not a term that is usually used when the initial product offer is extended by a rate or price that is considered lower than the market value. This will mean that the bid price at the IPO time will vary from the price of the first offer on the offer. In general, this is a temporary situation that is quickly corrected on the basis of the economic principles of supply and demand.

There are several reasons why the company may decide to engage in underestimation. One of the key reasons is the use of human nature. Many people enjoy negotiations. This certainly applies to people who decide to make financial investments. By initially setting shares prices for less than the market value that experts believe that shares are worth, the investor feels a lot, which will get a return in a very short period of time. The company thus offers shares for a limited time starting with the point of the original issue at a reduced price and motivates People to get to a good ground level.

Second, underestimation not only attracts investors who move quickly to ensure a limited number of shares. Strategy can also help increase the company's public profile. This can help attract more investors who lack the first wave of IPO, but have decided to invest on the basis of timely performance of shares. At the same time, the buzzing created by underestimation also increases awareness of the business community regarding the company and goods and services offered by companies. This can lead to profitable business to business relations, new clients and an increased lower line, which will eventually increase the value of the shares.

While underestimation often works very well, it is not an approach that every company should use at the time of the initial public offer. Depending on the short and long -term goals of the company, the type of products offered and performance expectations, underestimation may actually damage the company's prospects rather than improve. For this reason, owners and partners associated with the company should consider all options before they decide to lead with the first price price for the initial offer.