Why are initial public offerings (IPOs) underpriced? I argue that firms can have strategic reasons to underprice. Most importantly because the first trading day share price increase that is the result of underpricing increases firm legitimacy by enhancing the public recognition of a firm. This increased legitimacy and public recognition can be used to attract critical stakeholders such as skilled workers and customers. I show that firms strategically choose their underwriter to decrease underpricing. Firms that benefit from underpricing will choose low reputation under-writers which in turn will results in higher underpricing.