How is the IPO price decided?

There are firms that take companies through the IPO process. They are called underwriters.

Underwriters use various methods to estimate the share price. There are a few methods like discounted cash flow method, comparing with other companies, etc.

Once they have a share price that they think is good, they have two options.

Fixed price offering: where one share price is offered to investors.

Book building offering: where they keep the price in a 20% range and let investors bid for shares.

Based on the bidding, the final price is decided.