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Valuing initial public offerings (IPOs) using multiples allows underwriters discretion when se-lecting comparable firms. We find that they systematically exclude candidate comparable firms that make a given IPO appear overvalued. On average, comparable firms published in official prospectuses have 13%-38% higher valuation multiples than those obtained from matching algo-rithms or selected by sell-side analysts, including the same underwriter s analyst after the IPO. Even if IPOs are priced at a discount as compared to peers selected by the underwriters, they are still at a premium with regard to alternatively selected peers. Greater bias in the underwriter s selection of peers leads to poorer long run performance.
