Unless otherwise defined, the favorable difference (positive difference) between the initial quotation of a newly issued security (share, bond) and the issue price, also called the subscription yield (money left on the table). – The reverse phenomenon, where the issue price is higher than the initial listing price, is known as overpricing. – Underpricing is explained by various reasons, such as – as a result of asymmetric information distribution between informed and uninformed investors, – caused by asymmetric information distribution between issuing house and issuer or – as an effect of asymmetric information distribution between issuer and investors. A number of other causes, in particular interest rate and exchange rate changes between the offer to sell and the issue, are discussed in the relevant literature. – See issue price, over-allotment option.
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