scholarly journals New evidence of short-run underpricing in Australian IPOs

2016 ◽  
Vol 13 (2) ◽  
pp. 99-108 ◽  
Author(s):  
Wasantha Perera ◽  
Nada Kulendran
Keyword(s):  
Initial Public Offerings ◽  
Market Performance ◽  
Abnormal Returns ◽  
Industrial Sector ◽  
Secondary Market ◽  
Public Offerings ◽  
Cumulative Abnormal Returns ◽  
Closing Price ◽  
Short Run ◽  
New Evidence

The short-run market performance of initial public offerings (IPOs) indicates that the prices are often underpriced. This is widely accepted as a universal phenomenon. To find out whether Australian IPOs are underpriced, this paper analyzes the short-run market performance of 254 IPOs by industry, listing year and issue year. To measure the performance, the first-day returns are divided into the opening price primary market and the closing price secondary market, and the post-listing returns are also examined. The study found that, overall, Australian IPOs were underpriced by 25.47% based on abnormal returns and 26.43% on raw returns on the first-day primary market, which was statistically significant at the 1% level. However, analysis of the secondary market indicates that the Australian IPOs were overpriced by 1.55% and 1.54% on abnormal and raw returns, respectively, which was statistically significant at the 5% level. The examination of post-listing returns shows that Australian IPOs were underpriced based on cumulative abnormal returns (CARs) on the 3rd, 6th, and 10thdays by 24.63%, 24.06%, and 23.34%, respectively. The primary and post-listing analysis shows that IPOs in the industrial sector are more attractive to investors, whereas those in the chemical and materials sector are less attractive compared to other sectors. As far as the investors’ wealth is concerned, the study concludes that the short-run market performance analysis should consider both the first-day and post-listing returns

Performance of IPOs of Indian Companies Backed by Private Equity

2019 ◽  
Vol 23 (4) ◽  
pp. 397-409
Author(s):  
Till Drebinger ◽  
Shailendra Kumar Rai ◽  
Heiko Hinrichs
Keyword(s):  
Initial Public Offerings ◽  
Private Equity ◽  
Positive Impact ◽  
Abnormal Returns ◽  
Public Offerings ◽  
Ipo Performance ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
Short Run ◽  
The Impact

We examine 616 Indian initial public offerings (IPOs), including 116 IPOs backed by private equity (PE), between 2000 and 2016, to test whether PE-backed IPOs perform better than non-PE-backed IPOs in the short run as well as in the long run in terms of cumulative abnormal returns (CARs). We also examine the impact of the PE firm nationality on post-IPO performance. Consistent with the existing literature, we find underperformance for all IPOs, on an average, within 1 year. However, PE-backed IPOs have lower degree of underperformance than non-PE-backed IPOs. We also find that size, liquidity and leverage have a positive impact on the post-IPO performance after the financial crisis, whereas issue amount and capital issue year are negatively correlated to CARs before and during the crisis. We also find significant effects of PE firm nationality on CAR development. IPOs backed by India-dedicated PE firms perform best, while those backed by foreign PE firms perform worst and even underperform non-PE-backed IPOs. IPOs by foreign PE firms perform better if they co-invest with India-dedicated PE firms.

scholarly journals Long-run market performance of initial public offerings in Saudi Arabia: Does sharia-compliant status matter?

2017 ◽  
Vol 14 (3) ◽  
pp. 293-298 ◽  
Author(s):  
Faisal Alqahtani ◽  
Zakaria Boulanouar
Keyword(s):  
Saudi Arabia ◽  
Initial Public Offerings ◽  
Market Performance ◽  
Abnormal Returns ◽  
Firm Level ◽  
Public Offerings ◽  
Cumulative Abnormal Returns ◽  
Equality Of Means ◽  
Long Run ◽  
One Year

This research presents a comprehensive analysis of initial public offerings (IPOs) in Saudi Arabia, using a sample of 72 IPOs examined during the period between 2004 and September 2010. To compute the market performance of the IPOs, we split the sample into two sub-samples: sharia-compliant and non-sharia-compliant and we use two methods of calculations which are buy and hold abnormal returns (BHAR) and cumulative abnormal returns (CAR). In contrast to the majority of reported outcomes worldwide, our results show that based on one-year after-market performance, on average, underperformance does not exist in the Saudi market. The regression analysis shows that the factors driving long-run market performance include initial return and ownership structure, firm level risk, age and sharia-compliant status. The highlight of this paper, however, underscored using T-test for equality of means that was performed on the two sub-samples aftermarket adjusted returns is that Sharia-compliant status significantly alters the level of one-year market performance. This result supports our hypothesis that sharia-compliant firms will enjoy superior non-negative returns compared to non-sharia compliant firms, and supports the over-reaction hypothesis. Based on this result, we introduce a new factor which we call non-sharia-compliant underperformance.

scholarly journals The Pricing of Portuguese Privatisation Second Initial Public Offerings

2014 ◽  
Vol 2014 ◽  
pp. 1-13
Author(s):  
Rui Alpalhão
Keyword(s):  
Empirical Evidence ◽  
Initial Public Offerings ◽  
Abnormal Returns ◽  
Alternative Methods ◽  
Public Offerings ◽  
The Past ◽  
Cumulative Abnormal Returns ◽  
Long Run ◽  
Short Run ◽  
Good Rating

The paper studies the pricing of PSIPOs (privatization second initial public offerings) PIPOs of companies that had been public in the past. A dataset comprising all the Portuguese companies nationalized in 1975 and privatized in the late eighties and nineties is used. Findings on short- and long-run pricing of IPOs and PIPOs are summarized, and implications for the pricing of PSIPOs are discussed. Short- and long-run returns are computed, using three alternative methods (buy and hold abnormal returns, wealth relatives, and cumulative abnormal returns) in the long-run analysis. Short-run overpricing is identified, unlike the underpricing pattern revealed by most IPO research. This initial overpricing is essentially found to be corrected in the first trading month. In the long-run, no evidence of overpricing is found, again unlike the usual conclusion of the IPO literature, and more in line with empirical evidence on second IPOs. Results provide support to the conclusion that privatization IPOs tend to be less underpriced than standard IPOs and that firms coming back to the market for a second IPO tend to be less underpriced than pure IPOs and provide a good rating for the performance of the Portuguese Republic pricing stocks in the Portuguese privatization program.

scholarly journals Review of short-run performance of initial public offerings in Australia

2021 ◽  
Vol 18 (2) ◽  
pp. 188-200
Author(s):  
Lutfa Tilat Ferdous ◽  
Niroshani Parahara Withanalage ◽  
Abyan Amirah Qamaruz Zaman
Keyword(s):  
Regression Analysis ◽  
Initial Public Offerings ◽  
Stock Exchange ◽  
Secondary Market ◽  
Publicly Traded ◽  
Ipo Underpricing ◽  
Secondary Markets ◽  
Public Offerings ◽  
Short Run ◽  
Total Market

This study investigates the short-run performance of initial public offerings in Australia. Based on sources from the Morningstar DatAnalysis database, we analyzed 211 Australian publicly traded initial public offerings (IPO) listed on the Australian stock exchange between January 2011 and December 2015 using multiple regression analysis with dummies to represent industry and listing year. According to our analysis, total market return indicates an IPO underpricing phenomenon whereas secondary market shows an overpricing scenario. Moreover, this analysis supports the contention that short-run performance fluctuations were based on the listing year and industry settings. This study contributes to the literature by analysing the short-run performance of both the primary and secondary markets

scholarly journals Market Performance of Sponsor-Backed Initial Public Offerings: An Empirical Analysis of the German Market

2018 ◽  
Vol 4 (1) ◽  
pp. 31
Author(s):  
Jung Maximilian ◽  
Jyoti Gupta
Keyword(s):  
Initial Public Offerings ◽  
Multivariate Regression ◽  
Private Equity ◽  
Market Performance ◽  
Abnormal Returns ◽  
Special Focus ◽  
Data Set ◽  
German Market ◽  
Public Offerings ◽  
Long Run

<p><em>This paper investigates the overall market performance of Initial Public Offerings (IPOs) in Germany, by analyzing the short and long run performance of IPOs, utilizing the data from 2000-2013. Furthermore the study aims to distinguish and compare the performance of sponsor backed IPOs to non-sponsor backed IPOs, by placing a special focus on the value creating abilities of financial sponsors. The examined data set consists of 286 IPOs out of which 46 can be considered as IPOs which were backed by financial sponsor. The study suggests that, on average, IPOs significantly underperform their benchmarks. Furthermore, the evidence implies significant differences across the IPO groups with regard to performance and operational indicators. The multivariate regression shows that in the long run, private equity firms outperform their counterparts, signified by greater buy-and hold abnormal returns respectively recorded within the three-year period after the IPO. </em></p>

scholarly journals Short-run underpricing and its determinants: Evidence from Australian IPOS

2016 ◽  
Vol 13 (3) ◽  
pp. 502-517 ◽  
Author(s):  
Wasantha Perera ◽  
Nada Kulendran
Keyword(s):  
Abnormal Return ◽  
Market Performance ◽  
Industrial Sector ◽  
Secondary Market ◽  
Probability Analysis ◽  
Market Volatility ◽  
Marginal Probability ◽  
Long Run ◽  
Short Run ◽  
Total Market

To find out whether the Australian IPOs are underpriced and what the determinants are, this study investigates the short-run market performance of 254 IPOs by industry, listing year and issue year over the period 2006 to 2011.To measure the short-run performance, the first listing day returns are divided into the primary market which is calculated based on the first day beginning prices and issue prices, the secondary market which is estimated based on the first day closing and opening prices and total market which is calculated based on the first day closing prices and issue prices. Then it is extended to the post-day listing analysis which includes returns up to 10 days. To find out the determinants of underpricing, this study estimates binary and multiple regression models with the offer, firm and market characteristics. The marginal probability analysis was also carried out to estimate the associated probability of each determinant which shows a directional change in the short-run market performance. The study found that overall the Australian IPOs are underpriced by 25.47% and 23.11% based on the average abnormal return (AAR) in the primary and total market, which is statistically significant at 1% and 5% level respectively. However, the secondary market analysis indicates that the Australian IPOs are overpriced by 1.55% on the AAR and it is statistically significant at 5% level. The examination of post listing returns shows that Australian IPOs are underpriced based on the average cumulative abnormal return (CAR) and it signals that investors’ wealth can be diluted due to overpricing in the long-run. The primary, total and post listing analysis shows that the industrial sector IPOs are more attractive to investors whereas the chemical and material sector IPOs are less attractive compared to other sectors. The IPO period, time to listing, listing delays, total net proceeds ratio, issue price, attached share option and the market volatility are the main determinants for the observed underpricing. The marginal probability analysis also shows that market volatility and total net proceeds ratio have a significant impact on the level of underpricing. As far as the investors’ wealth is concerned, the study shows that the short-run market performance analysis should consider both the first day return including primary and secondary market and the post-day return. Study concludes that short-run market performance is sensitive to the market, industry and listing & issue year and determinants to the model.

Searching for Gambles: Gambling Sentiment and Stock Market Outcomes

2020 ◽  
pp. 1-29 ◽  
Author(s):  
Yao Chen ◽  
Alok Kumar ◽  
Chendi Zhang
Keyword(s):  
Stock Market ◽  
Initial Public Offerings ◽  
Spillover Effect ◽  
Abnormal Returns ◽  
Institutional Ownership ◽  
Market Outcomes ◽  
Local Bias ◽  
Public Offerings ◽  
Search Volume ◽  
Short Run

Abstract Using Internet search volume for lottery to capture gambling sentiment shifts, we show that when the overall gambling sentiment is strong, investor demand for lottery stocks increases, these stocks earn positive short-run abnormal returns, managers are more likely to split stocks to cater to the increased demand for low-priced lottery stocks, and initial public offerings (IPOs) earn higher first day returns. Further, the sentiment-return relation is stronger among low institutional ownership firms, headquartered in regions where gambling is more acceptable and local bias is stronger. These results suggest that gambling sentiment has a spillover effect on the stock market.

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