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Royal Mail IPO

I got my allocation of Royal Mail shares during the night - 227 in total at a price of 330 pence. This morning, Royal Mail shares are up 38% in early morning trading (story here). This is good news for investors, but bad news for taxpayers because the shares have obviously been underpriced by the government. Taxpayers could have got more money from the privatisation of the Royal Mail - money has been left on the table! 

One of the greatest puzzles in financial economics is why Initial Public Offerings (IPOs) are underpriced by about 15% on average.  Click here to read a NY Times piece on why IPOs are underpriced, here to see a survey paper on the same subject, and here to see Jay Ritter's IPO website.

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