Initial Public Offerings, Subsequent Seasoned Equity Offerings, and Long-Run Performance: Evidence from IPOs in Germany

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.

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

The Oxford Handbook of IPOs ◽

10.1093/oxfordhb/9780190614577.013.15 ◽

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.

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

International Journal of Financial Studies ◽

10.3390/ijfs7010016 ◽

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.

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Lockups Revisited

Journal of Financial and Quantitative Analysis ◽

10.1017/s002210900000185x ◽

2005 ◽

Vol 40 (3) ◽

pp. 519-530 ◽

Cited By ~ 61

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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Early wealth effects of regional ADRs

International Journal of Managerial Finance ◽

10.1108/ijmf-07-2014-0098 ◽

2015 ◽

Vol 11 (2) ◽

pp. 198-214 ◽

Cited By ~ 2

Author(s):

Mark Schaub

Keyword(s):

Initial Public Offerings ◽

Latin American ◽

Seasoned Equity Offerings ◽

Wealth Effects ◽

Equity Offerings ◽

Short Term ◽

Content Type ◽

Public Offerings ◽

Market Index ◽

The Us

Purpose – The purpose of this paper is to determine what types of short-term wealth effects accrued to European and Latin American American Depository Receipt (ADR) investors and whether these were affected by the type of issue (initial public offerings (IPO) vs seasoned equity offerings (SEO)) or the date of issue (1990s vs 2000s). Design/methodology/approach – Standard ADR and IPO excess return methodology is utilized to compute and test excess returns against a US investment benchmark. This methodology is used in many ADR and IPO studies. Findings – European SEOs listed in the 2000s did better than those listed in the 1990s. The results for European IPOs were the opposite. Latin American SEOs did better relative to the US market index for issues listed in the 1990s as compared to those listed in the 2000s. Once again the results for Latin American IPOs were the opposite. Originality/value – This study differs from previous studies by emphasizing differences in short-term return behaviour for Latin American and European ADRs listed during a decade of US market stability (the 1990s) vs those listed in the 2000s when the US stock market encountered times of extreme return volatility. These timing differences affect not only the returns of all the ADRs but also show how ADR IPOs and SEOs tend to have opposite return behaviour based on timing. These return differences are important because the major benefits of portfolio diversification are achieved when asset returns are less correlated with each other.

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The Underpricing of Initial Public Offerings and Private Placements of Equity in China

The Oxford Handbook of IPOs ◽

10.1093/oxfordhb/9780190614577.013.7 ◽

2018 ◽

pp. 572-591

Author(s):

Gang Nathan Dong ◽

Ming Gu

Keyword(s):

Initial Public Offerings ◽

Seasoned Equity Offerings ◽

Equity Offerings ◽

Publicly Traded ◽

Ipo Underpricing ◽

Public Offerings ◽

Private Placements ◽

Strategic Role ◽

International Setting

While the costs borne by firms in raising external capital through initial public offerings (IPOs) and seasoned equity offerings are well documented, the strategic role of IPO underpricing in the market for raising equity after the IPO remains largely unstudied, particularly in an international setting. In China publicly traded firms often issue post-IPO equity through private placements of equity (PEPs), rather than public offerings. This chapter examines the relationship between the pricing behavior of IPOs and the issuance choice of future PEPs. Do companies use IPO underpricing as a strategic precursor toward raising additional capital in future PEPs? If the success of initial offerings of equity can help improve the capital-raising capacity and reduce the issuance cost in subsequent offerings, high-quality firms will intentionally pursue a multiple-issue strategy by lowering the IPO offer price in order to raise more capital at a higher price in PEPs.

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Auditor Changes and the Pricing of Seasoned Equity Offers

Accounting Horizons ◽

10.2308/acch.2006.20.4.333 ◽

2006 ◽

Vol 20 (4) ◽

pp. 333-349 ◽

Cited By ~ 12

Author(s):

Yongtae Kim ◽

Myung Seok Park

Keyword(s):

Initial Public Offerings ◽

Positive Association ◽

Seasoned Equity Offerings ◽

Shopping Behavior ◽

Equity Offerings ◽

Public Offerings ◽

Opinion Shopping ◽

Practical Standpoint ◽

Prior Literature

While prior literature examines the role of auditors in the pricing of initial public offerings, little is known about the effect of auditor changes on the pricing of seasoned offers. Our examination of seasoned equity offerings shows that companies switching auditors prior to the offerings underprice their offers more than do companies without changes. While we provide evidence of issuers' opportunistic accounting decisions that are consistent with their opinion-shopping behavior, the positive association between underpricing and auditor changes suggests that switchers bear a net cost compared to non-switchers. From a practical standpoint, our findings alert a company considering a change of its auditor prior to a new equity issue.

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