Part I General Aspects, 3 Stabilization and Underpricing in IPOs

2020 ◽  
Author(s):  
Lombardo Stefano
Keyword(s):  
Economic Theory ◽  
Detailed Analysis ◽  
Initial Public Offering ◽  
Market Manipulation ◽  
Market Abuse ◽  
The Us ◽  
Insider Dealing ◽  
General Aspects ◽  
Public Offering

This chapter zooms in on stabilization and underpricing in IPOs. The Market Abuse Regulation (MAR) provides an exemption from the prohibitions of insider dealing and of market manipulation for the stabilisation of securities. This is usually realised in the case of an initial public offering (IPO) and is regulated in detail by Commission Delegated Regulation 2016/1052. The chapter thus introduces the economic theory of IPOs, analysing in particular the underpricing phenomenon (and its opposite, the overpricing). After a comparative and useful description of the US system of IPO stabilization activity, the chapter focuses on a detailed analysis of the European regime under MAR and Regulation 2016/1052.

Part I General Aspects, 2 The IPO Process, IPO Disclosure, and the Prospectus Regulation

2020 ◽  
Author(s):  
Teerink Han
Keyword(s):  
Initial Public Offering ◽  
The Other ◽  
Business Information ◽  
Other Hand ◽  
The One ◽  
General Aspects ◽  
Public Offering ◽  
The Right ◽  
Insight Into

This chapter offers insight into a typical initial public offering (IPO) process, highlighting key practical and legal considerations around disclosure, through the IPO prospectus and otherwise. The prospectus plays a key role in the preparations for, and execution of, an IPO. As an IPO prospectus typically constitutes a company's first public dissemination of financial and business information, the company and other parties involved in the IPO process must carefully consider the right balance between, on the one hand, drafting the IPO prospectus as a marketing document introducing the company and its business to potential investors, whilst, on the other hand, being able to use the prospectus as a disclosure document that protects the company against liability arising from claims from investors or others after the IPO. Here, the chapter summarizes the different phases in an IPO process and the most important documents and parties involved, focusing on the central role of the IPO prospectus. In addition, a number of changes resulting from the enactment of the Prospectus Regulation are likely to be of particular relevance to IPO processes. The expected impact of these changes is therefore also discussed.

Part A Annotated Guide, 3 The Concept of Market Manipulation

2017 ◽  
Author(s):  
Mock Sebastian
Keyword(s):  
Capital Markets ◽  
Short Selling ◽  
Market Manipulation ◽  
Market Abuse ◽  
Annotated Guide ◽  
Insider Dealing ◽  
European Regulations

This chapter discusses the concept of market manipulation. In contrast to the prohibition of insider dealing, market manipulation is not a single act or set of different behaviours but more of a multi-layer phenomenon covering all kinds of behaviours generally not accepted in any market. In capital markets law, four different forms of market manipulation developed, which can also be found in the Market Abuse Regulation (and other European regulations). These are information-based manipulation, transaction-based manipulation, short selling, and other forms of manipulation. However, the Market Abuse Regulation does not refer expressly to each of these forms of market manipulation but defines market manipulation in its Article 12 in general.

What you give is what you get: Investment in European biotechnology

1969 ◽  
Vol 12 (4) ◽  
Author(s):  
William Bains
Keyword(s):  
Initial Public Offering ◽  
North American ◽  
Biotechnology Industry ◽  
Lower Amount ◽  
American Industry ◽  
Cause And Effect ◽  
The North ◽  
The Us ◽  
European Industry ◽  
Public Offering

The European biotechnology industry receives less funding, and less funding per company, than the North American industry, especially at the sensitive early stages of company development, and the European industry is substantially smaller in terms of employment, products and capitalisation than the US industry. The cause and effect of this relationship are explored in this paper. It is shown that if the European industry is immature it is because its growth has been slower, most probably because of low investment levels, and that the relatively lower value of biotech companies at initial public offering (IPO) is a result of the lower amount of investment they receive, not a reason for. This suggests that poor investment levels are a primary cause of the small size of European biotech companies and the European industry as a whole, not an effect of it. Investor mistrust and investment mechanisms are plausible reasons for this under-investment.

Private Class Action Litigation Risk of Chinese Firms Listed in the US

2017 ◽  
Vol 07 (01) ◽  
pp. 1650020 ◽  
Author(s):  
Jan Jindra ◽  
Torben Voetmann ◽  
Ralph A. Walkling
Keyword(s):  
Initial Public Offering ◽  
Cash Flows ◽  
Class Action ◽  
Litigation Risk ◽  
Chinese Firms ◽  
Regulatory Oversight ◽  
Reverse Merger ◽  
The Us ◽  
Prior Literature ◽  
Public Offering

We analyze the litigation risk of Chinese firms listed in the US. We find that firm-specific characteristics from prior literature studying US firms are not correlated with the litigation risk of US-listed Chinese firms. However, our findings indicate that the method of listing is the only reliable predictor of litigation risk — firms listing via reverse merger are significantly more likely to face lawsuits compared to firms listing via initial public offering (IPO). We find that Chinese reverse merger (CRMs) firms, relative to Chinese IPOs, have lower analyst following, similar post-listing stock performance, higher operating cash flows, smaller size, and lower cash holdings. We conclude that the litigation risk differential is consistent with the bonding hypothesis of [Stulz 1999, Globalization of Equity Markets and the Cost of Capital, Journal of Applied Corporate Finance 12, 8–25], wherein the higher litigation risk of CRMs is a reflection of increased but varying levels of monitoring, starting with the regulatory oversight at the pre-listing stage and a post-listing tradeoff between enforcement and monitoring by shareholders.

Part II UK Securities Markets, 5 UK Listing, Prospectus, and Disclosure Regime

2021 ◽  
Author(s):  
Pearce Will
Keyword(s):  
Financial Services ◽  
Action Plan ◽  
European Economic Area ◽  
Market Manipulation ◽  
Inside Information ◽  
Market Abuse ◽  
Eu Legislation ◽  
Capital Markets Union ◽  
Insider Dealing ◽  
The Uk

This chapter talks about the current UK listing regime that stems from the EU legislation that was enacted as part of the European Commission's action plan for the Capital Markets Union (CMU) and Financial Services Action Plan (FSAP). It describes the aims of the CMU and the FSAP in order to achieve a single financial services market with no obstacles to cross—border activity and a sound supervisory structure. It also highlights the key EU legislation that governs the UK listing regime, which includes the prospectus regulation that regulates the prospectus to be published when a company's securities are to be offered to the public or admitted to trading on a regulated market in the European Economic Area (EEA). This chapter discusses the Market Abuse Regulation (MAR), which covers the disclosure and control of inside information and the offences of market manipulation and insider dealing. It also mentions the Transparency Directive that harmonizes transparency requirements for issuers whose securities are admitted to trading on a regulated market.

scholarly journals IPO as a VC-Funds Type of Exit

2019 ◽  
pp. 99-129
Author(s):  
Dorota Podedworna-Tarnowska
Keyword(s):  
Initial Public Offering ◽  
Private Equity ◽  
Third Party ◽  
Going Public ◽  
Public Offerings ◽  
Advantages And Disadvantages ◽  
The Us ◽  
Portfolio Company ◽  
Venture Capital Firms ◽  
Public Offering

The key characteristic of private equity finance is that investors hold their investments only for a limited period of time. The key goal of VC funds is to grow the company to a point where it can be sold at a price that far exceeds the amount of capital invested. This process is called an exit or divestment. There are three basic types of exits: going public, being acquired by a larger corporation, a sale to a third-party investor.It is a widely believed and accepted proposition in private equity literature that the initial public offering of a private equity portfolio company is the most successful and profitable exit opportunity. However, according to the few sources of literature, public offerings are not the preferred divestment type for venture capital firms. Going public is one of the most critical decisions in the lifecycle of a firm. This is not easy, as the process is very comprehensive and complex. Hence, a lot of considerations should be taken into account. Because every investee firm is different, a development plan to achieve a successful exit takes into consideration a number of macroeconomic and microeconomic factors. Moreover, several advantages and disadvantages of exit through an IPO could be indicated. The objective of this paper is to show the success and profitability of going public by VC funds. The VC’s exit type as a way of cashing out on its investment in a portfolio company is a consequence of the exit strategy, which means the plan for generating profits for owners and investors of a company. While an IPO is the most spectacular and visible form of exit, it is not the most common one, as historically in the US it was, but still in Europe it has not been yet. There will be both literature and statistical data coming from different studies and reports used in this research.

Valuation Uncertainty and Short-Sales Constraints: Evidence from the IPO Aftermarket

2021 ◽  
Author(s):  
Panos N. Patatoukas ◽  
Richard G. Sloan ◽  
Annika Yu Wang
Keyword(s):  
Detailed Analysis ◽  
Initial Public Offering ◽  
Equity Market ◽  
Short Sales ◽  
Market Data ◽  
Market Mispricing ◽  
Valuation Uncertainty ◽  
Public Offering ◽  
Lockup Expiration

We use the initial public offering (IPO) setting to provide evidence that the combination of valuation uncertainty and short-sales constraints generates significant equity market mispricing. The IPOs that we predict to be most susceptible to overpricing in the immediate aftermarket have first-day returns of +47% and lockup expiration returns of [Formula: see text]9%. Our detailed analysis of securities lending market data confirms that these IPOs experience severe short-sales constraints that peak around the lockup expiration. Our paper both explains the anomalous pricing of IPOs and highlights the importance of valuation uncertainty and short-sales constraints in explaining equity mispricing. This paper was accepted by Brian Bushee, accounting.

12. Market abuse

2018 ◽  
Author(s):  
Derek French
Keyword(s):  
Criminal Justice ◽  
Financial Services ◽  
Fiduciary Duty ◽  
Market Manipulation ◽  
Market Abuse ◽  
Regulated Markets ◽  
Insider Dealing ◽  
Significant Case

This chapter deals with abuses committed in the trading of shares, with particular reference to insider dealing and market manipulation, and the laws intended to control them. The chapter considers forms of control to prevent market abuse under three key pieces of legislation: Regulation (EU) No 596/2014, the Criminal Justice Act 1993 and the Financial Services Act 2012. It looks at regulations governing disclosure to regulated markets and the fiduciary duty of directors, and offences involving insider dealing and creating a false market. The chapter analyses a particularly significant case: Percival v Wright [1902] 2 Ch 421.

Part A Annotated Guide, 4 Public Disclosure of Inside Information and Market Abuse

2017 ◽  
Author(s):  
Pietrancosta Alain
Keyword(s):  
Public Institutions ◽  
Market Manipulation ◽  
Inside Information ◽  
Market Abuse ◽  
Preventative Measures ◽  
Disclosure Requirements ◽  
Overwhelming Evidence ◽  
Annotated Guide ◽  
Insider Dealing ◽  
High Level

This chapter concerns the provisions laid out in the Market Abuse Regulation (MAR) regarding the unlawful disclosure of inside information and market manipulation. Considering the overwhelming evidence of a high level of market abuse activity, the preventative measures laid out here can be considered the MAR’s main contribution. Articles 17 to 21 of the MAR serve to complement the main market abuse prohibitions, serving the ancillary purpose of reducing the potential occurrences of insider dealing or market manipulation, through special, prompt, or objective disclosure requirements weighing on persons categorized according to the sensitivity of their professional positions. Articles 17 to 19 mainly concern issuers and their managers. Articles 20 and 21 impose objectivity and transparency requirements on persons producing or disseminating investment recommendations and on public institutions disseminating statistics or forecasts.

5 Market Abuse

2020 ◽  
Author(s):  
De Carvalho Robalo Pedro
Keyword(s):  
Financial Crisis ◽  
Market Efficiency ◽  
European Commission ◽  
Market Manipulation ◽  
Market Abuse ◽  
Criminal Sanctions ◽  
Insider Dealing ◽  
Broad Framework ◽  
Undue Advantage ◽  
The Eu

This chapter assesses market abuse. Market abuse offences, in all of their possible forms, frustrate the concept of market efficiency by allowing undue advantage to the individuals performing the abusive actions, thus jeopardizing the development of fair and orderly markets. In turn, this is likely to harm confidence by undermining investors' beliefs that the market is fair, leading them to withdraw their investments. In Europe, the first European-wide legislative package was initiated with the adoption of the Market Abuse Directive in 2003 (Directive 2003/6/EC), with the aim of providing a broad framework that would address market manipulation and insider dealing practices in the EU. However, in the aftermath of the Financial Crisis in 2008, a review of the regime was required as a number of deficiencies were found. In 2011 and in order to address these issues, the European Commission adopted the proposal for the Regulation on insider dealing and market manipulation (MAR) as well as the Directive on Criminal Sanctions for Insider Dealing and Market Manipulation (CSMAD).

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