The underwriters are incentivized to price an IPO fairly accurately, yeah, because they’re playing a repeated game. If they price it too high they’ll have troub

The underwriters are incentivized to price an IPO fairly accurately, yeah, because they’re playing a repeated game. If they price it too high they’ll have trouble selling new stock to investors in the future; too low and they’ll have trouble drumming up new business from private companies that want to raise capital in the public markets. This is distinct from the underwriters’ incentives to estimate the valuation when they pitch the company on why they should do the IPO. If you give a number that’s too low you get nothing, so your incentive is to name as high a number as possible without being obviously ridiculous (to the executives, not to anyone else).