IRJMSH Vol 11 Issue 12 [Year 2020] ISSN 2277 – 9809 (0nline) 2348–9359 (Print) International Research Journal of Management Sociology & Humanity ( IRJMSH ) Page 200 www.irjmsh.com AN OVERVIEW OF UNDERPRICING OF INITIAL PUBLIC OFFERINGS Kamal Kumar, PhD. Research Scholar, Department of E.A.F.M, University of Rajasthan Dr. Ravindra Kumar Katewa, Head of Department (EAFM), R.N.R. Government P.G. College, Ramgarh, Shekhawati IPO Introduction The idea of a firm's going public and profitability plays the most important role in investment decisions in the field of finance. Consequently, any firm's goal is to retain its core activities and to keep stakeholders successful over time (specifically to shareholders). A growing company requires capital to invest, and it can be created from different sources like the equity, external equity, debt or other types. In addition to shareholders' capital and income, companies typically raise money out of the market by various means, including private sector investment, venture capital, loan and the issuance of debt. Traditional financial sources (owners' equity, debt and retained earnings) are often insufficient to fund an organization because of fast growth or rising costs. Rock (1986) claimed that one of the key reasons for companies behind the public is their risk aversion because risk is only shared by publicly traded companies' owners and financers. One effective way to collect funds is therefore to proceed with initial public offering (IPO). In order to invest in a business, IPOs are most widely used to raise capital from the public to support a new venture and disseminate ownership through securities. Loughran et al (1994) have found three different mechanisms in each country: fixed price deals, books building method, and auctions. Sherman (2005) indicated that book building was a better method than auctioning and therefore less expensive as the underwriter ensured that a minimum of informed investors participated. UNDERPRICING OF IPO The IPO underpricing, simply is, when the listing price is higher, the difference between the closing offer price of an inventory (through IPO) and the closing price of an inventory at the first (listing) day of trade. It gives investors a short-term chance for investment, of course. Therefore, the huge rush of firms into stock exchange listing and IPO fund-generating is marked with an enormous queue of investors awaiting IPO allotments, regulatory framework creation and primary-market investment banking expansion. These specific features have made IPO an interesting financial study case. A business announces the IPO or the offer to issue new equities in the market by presenting information on the company's history, its previous financial results, its purposes and the expectations for the future along with the risk. This risk may be an investment in risky ventures or the non-allocation of shares as a result of oversubscription, and such risks must in some way be covered. It was shown that the majority of IPOs are traded on the listing day at a higher price. The company is now facing a lack of opportunity and could raise more capital by charging higher rates, which it did not actually. It seems that investors vary from other people regarding the company's potential prospects: The company was unfairly priced and deserves a better price. The greater the price, the larger the revenue the organization will produce from the higher price bid, but businesses have lost the money. This incidence is labelled by issuers as "money left on the table" (Pande and Vaidyanathan, 2009).