Does Sentiment Drive the Retail Demand for IPOs?

2009 ◽  
Vol 44 (1) ◽  
pp. 85-108 ◽  
Author(s):  
Daniel Dorn
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Equity Offerings ◽  
Public Offerings ◽  
Trading Decisions ◽  
Retail Trading ◽  
Public Equity ◽  
Retail Demand ◽  
As If

AbstractIndividual and institutional investors can trade German initial public equity offerings on an as-if/when-issued basis before the start of secondary trading. Using actual when-issued trades made by a sample of clients at a large German retail broker during 1999 and 2000, the paper documents that retail buyers consistently overpay for initial public offerings (IPOs) in the when-issued market relative to the immediate aftermarket. The observed willingness to overpay points to sentiment as a driver of retail trading decisions. Consistent with this interpretation and with sentiment affecting prices, IPOs that are aggressively bought by individuals in the when-issued market exhibit high first-day returns as well as poor aftermarket returns relative to benchmarks of similar stocks.

scholarly journals Bookbuilding e Alocação Estratégica: Evidência do Mercado Brasileiro de Ações

2006 ◽  
Vol 4 (1) ◽  
pp. 33
Author(s):  
Richard Saito ◽  
José André C. M. Pereira
Keyword(s):  
Initial Public Offerings ◽  
Strong Evidence ◽  
Seasoned Equity Offerings ◽  
Secondary Market ◽  
Discretionary Power ◽  
Equity Offerings ◽  
Investment Bank ◽  
Public Offerings ◽  
Allocation Criteria

We examine four bookbuilding processes on the Brazilian stock market executed by an investment bank from 2003 to 2004. In a bookbuilding process, the investment bank has the discretionary power in pricing and in allocating shares to investors. We analyze the allocation determinants and we find empirical evidence that bookbuilding does induce investors to disclose superior information. However there is strong evidence that issues related to majority controlling position, liquidity on secondary market, and flipping activities impact on allocation criteria. We find differences between allocation determinants derived from (a) initial public offerings and (b) seasoned equity offerings, but in both cases there is a tendency to favor long term investors.

The Impact of IPOs’ Analyst Coverage on the Choice and Timing of SEOs

2018 ◽  
pp. 330-358
Author(s):  
Nesrine Bouzouita ◽  
Carole Gresse
Keyword(s):  
Survival Analysis ◽  
Initial Public Offerings ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Analyst Coverage ◽  
Public Offerings ◽  
Firm Commitment ◽  
The Impact

Based on a survival analysis on a sample of initial public offerings (IPOs) undertaken on Euronext and their subsequent seasoned equity offerings (SEOs) over the period 1995–2012, this chapter shows that analyst coverage in the months following an IPO facilitates subsequent SEOs and favors the longevity of the firm’s relationship with its initial underwriter. SEOs are facilitated in several dimensions: post-IPO analyst coverage increases the likelihood of the IPO firm to conduct an SEO with a firm commitment underwriting; it increases the occurrence speed of that SEO; and it increases the probability of that SEO to be intermediated by the same underwriter as the IPO.

Institutional ownership of dual-class companies

2021 ◽  
Vol 13 (2) ◽  
pp. 206-222
Author(s):  
Jonathan J. Burson ◽  
Marlin R.H. Jensen
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Value Added ◽  
Institutional Ownership ◽  
Voting Rights ◽  
Class Structure ◽  
Content Type ◽  
Public Offerings ◽  
Advantages And Disadvantages ◽  
Dual Class

Purpose This study aims to examine institutional ownership of companies that go public with dual-class share structures. Design/methodology/approach Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures. Findings Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions. Originality/value This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.

scholarly journals Explanatory Power of Pre-Issue Financial Strength for Long-Term Market Performance: Evidence From Initial Equity Offerings on an Emerging Market

2019 ◽  
Vol 7 (1) ◽  
pp. 16
Author(s):  
Leszek Czapiewski ◽  
Joanna Lizińska
Keyword(s):  
Initial Public Offerings ◽  
Factor Model ◽  
Emerging Market ◽  
Explanatory Power ◽  
Equity Offerings ◽  
Calendar Time ◽  
Developed Country ◽  
Public Offerings ◽  
Long Run

This study tests possible sources of long-term risk-adjusted returns on initial public offerings (IPO) in Poland under the calendar-time portfolio (CTP) approach. The moment of going public still remains a puzzle in many areas. Poland’s status as an emerging market has been indisputable for many years, though improvements in capital market infrastructure have led to its recent reclassification as a developed country. It is an important European equity market. Thus, research on IPO pricing explanation for Poland is important for both investors and academics. In this study, we estimate risk premiums and run regressions on four asset pricing models, including the latest innovation, which is the Fama-French 5-factor model. We also check the robustness. The research documents the existence of the long-run underperformance for Polish IPOs independently of the specification of the calendar-time portfolio approach as alphas range from -9.6% to -13.2% annually. We show that the underperformance is mainly driven by IPOs in a position of weak pre-issue financial health. More profitable IPOs experience less negative long-term returns and the underperformance is even absent in some specifications.

The Role of Institutional Investors in Initial Public Offerings

2010 ◽  
Vol 23 (12) ◽  
pp. 4496-4540 ◽  
Author(s):  
Thomas J. Chemmanur ◽  
Gang Hu ◽  
Jiekun Huang
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Public Offerings

scholarly journals IPO Pricing and Dealers’ Interaction: A Stochastic Frontier Approach

2020 ◽  
Vol 14 (1) ◽  
pp. 1
Author(s):  
Marco Cucculelli ◽  
Manuela Geranio ◽  
Camilla Mazzoli ◽  
Sabrina Severini
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Stochastic Frontier ◽  
Fair Value ◽  
Investment Banks ◽  
Stochastic Frontier Approach ◽  
Market Pricing ◽  
Public Offerings ◽  
Ipo Pricing ◽  
The Impact

This study investigates the impact of ongoing relationships between underwriters and institutional investors on Initial Public Offerings (IPO) pricing. Differently from previous studies that are focused on allocations of underpriced shares we propose a model of primary market pricing in which the incomplete adjustment of the offer price to its maximum achievable level depends on the intensity of interactions that occurred between players in the years before the IPO. Using a stochastic frontier approach on a sample of 1 677 US IPOs between 2000 and 2016 the paper shows that the more investment banks and investors regularly work together the more the IPO offer price is set closer to the fair value of the issuing firm. This analysis helps to disentangle the ambiguous effects of underwriters’ discretion on IPO primary market pricing when bookbuilding is used. We then support the idea that banks can maximize value to issuers by fostering a regular clientele of investors.

Lockups Revisited

2005 ◽  
Vol 40 (3) ◽  
pp. 519-530 ◽  
Author(s):  
James C. Brau ◽  
Val E. Lambson ◽  
Grant McQueen
Keyword(s):  
Moral Hazard ◽  
Adverse Selection ◽  
Initial Public Offerings ◽  
Empirical Support ◽  
Seasoned Equity Offerings ◽  
Comparative Statics ◽  
Equity Offerings ◽  
Public Offerings ◽  
Theoretical Predictions ◽  
Adverse Selection Problem

AbstractLockups are agreements made by insiders of stock-issuing firms to abstain from selling shares for a specified period of time after the issue. Brav and Gompers (2003) suggest that lockups are a bonding solution to a moral hazard problem and not a signaling solution to an adverse selection problem. We challenge this conclusion theoretically and empirically. In our model, insiders of good firms signal by putting and keeping (locking up) their money where their mouths are. Our model yields two comparative statics: lockups should be shorter when a firm is i) more transparent and/or ii) more risky. Using a sample of 4,013 initial public offerings and 3,279 seasoned equity offerings between 1988 and 1999, we find empirical support for our theoretical predictions.

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