Who decides the listing price of an IPO?
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The offer price of a share is the price at which the shares were purchased in the IPO process. Once the shares are listed on the stock exchange, the company goes public. The opening price at which the share debuted on the stock market is known as the IPO listing price. While the underwriting investment bank decides the offer price based on a vast array of commercial and operational factors, they cannot control the IPO listing price.
How is the listed price decided? – Market sentiments play a critical role in deciding the listed price. The principle of demand and supply is the key here. If sufficient buzz had been created regarding the IPO and the demand from investors is high, then it is quite likely that the listed price will be higher than the offer price. In the case of under-subscription or low demand, the listed price may fall short of the offer price leading to a loss to investors.