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Strategic Overpricing Of Initial Public Offerings
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Book Synopsis Strategic Overpricing of Initial Public Offerings by : Zheng Liu
Download or read book Strategic Overpricing of Initial Public Offerings written by Zheng Liu and published by . This book was released on 2012 with total page 288 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation extends theory and empirical research on Initial Public Offerings (IPOs) to include the unique context faced by underwriters that have the flexibility to overprice cold offerings. First, it argues that underwriters have the incentive to deliberately overprice weakly-received offerings in order to avert potential withdrawal of the offerings and loss of underwriting commissions. It then empirically tests this argument and finds supporting evidence. Measuring underwriter pricing intention by the NASDAQ-adjusted percentage change from the offer price to the closing price three days prior to the end of the quiet period, it finds deliberate overpricing to be more pronounced for offerings that end up priced exactly at the lower boundary of the preliminary price range, especially when the ex ante withdrawal probability is high or when the lower boundary represents a smaller percent drop from the range's midpoint. The dissertation then examines the effect of IPO overpricing on the long-term prospects of the underwriters. It empirically demonstrates that overpricing offerings to avert withdrawal not only increases the payoff to the underwriter from the respective deals but also enhances the underwriter's share of future IPO business. In particular, it finds that banks which engage issuers with a higher ex ante propensity to withdraw, and then aggressively price the offerings to actually avert withdrawal, experience a pronounced increase in their future IPO market share. Such reward is not experienced by underwriters which at the outset avoid engaging issuers with high likelihood of withdrawal. The dissertation also finds that withdrawals have more of an adverse effect on future market share than does mere overpricing. Furthermore, when overpricing is accompanied by even a low level of price support during first-day of public trading, the effect on the bank's future market share is significantly less adverse than that associated with otherwise letting the offer be withdrawn. The dissertation extends the IPO bookbuilding theory by developing a model which encompasses the potential for IPO withdrawal, overpricing, and aftermarket price support altogether, and solving for the equilibrium offer-price-maximizing price/allocation schedule. The analysis shows that overpricing can be sustained in equilibrium in a manner that still ensures maximized proceeds to the issuer. The optimal price/allocation rule calls for allocation priority to be given to investors with strong indications of interest; underpricing to occur when premarket demand is strong; and overpricing to be resorted to only as needed to avert withdrawal by the issuer in lukewarmly-received offerings. Aftermarket price stabilization plays two roles in equilibrium: It bonds the underwriter against deliberate overpricing when premarket demand is either strong or too weak; and it adequately compensates investors when overpricing is utilized to avert issue withdrawal.
Book Synopsis Pricing and Performance of Initial Public Offerings in the United States by : Arvin Ghosh
Download or read book Pricing and Performance of Initial Public Offerings in the United States written by Arvin Ghosh and published by Routledge. This book was released on 2017-07-05 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this timely volume on newly emerging financial mar- kets and investment strategies, Arvin Ghosh explores the intriguing topic of initial public offerings (IPOs) of securities, among the most significant phenomena in the United States stock markets in recent years. Before the 2000-2001 market turndown, hardly a week went by when more than a few companies did not become public, either in the organized stock exchange or in the Over the Counter (OTC) market. In the often over-burdened, technology-heavy Nasdaq market, the role of IPOs was crucial for the market's new vigor and growth. Internet stocks were able to find a mode to supply key momentum to the market. In the so-called "New Economy" of the 1990s, it was the seductively accessible IPO that ushered in the world's information technology revolution.Ghosh sets out to examine the pricing and financial performance of IPOs in the United States during the period 1990-2001. In the opening chapter he discusses the rise and fall of IPOs in the preceding decade. Chapter 2 further delineates the IPO process from the start of the prospectus to the end of the "quiet period" and aftermarket stabilization. In chapter 3 Ghosh analyzes the mispricing and deliberately deceptive underpricing, or "flipping," of Internet IPOs. Chapter 4 delves deeper into the pricing and operating efficiency of Nasdaq IPOs. Chapter 5 analyzes the pricing and long-run performance of IPOs both in the New York Stock Exchange and in the Nasdaq markets. In chapters 6 and 7 the author deals with the pricing and performance of the venture-blocked and nonventure-backed IPOs in general and Internet IPOs in particular. In chapter 8 he analyzes the role of underwriters as market makers. In chapter 9 Ghosh discusses the accuracy of analysts' earnings forecasts. In the concluding chapter, he summarizes the principal findings of the study and the recent revival of the IPO market and its place in capital formation as well as the latest developments in t
Book Synopsis Information Risk and Long-Run Performance of Initial Public Offerings by : Frank Ecker
Download or read book Information Risk and Long-Run Performance of Initial Public Offerings written by Frank Ecker and published by Springer Science & Business Media. This book was released on 2009-02-14 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: Frank Ecker examines the performance of U.S. initial public offerings (IPOs) from 1980 to 2002. He links positive and negative abnormal returns to the deviation of the realized information risk from the expected information risk. The author proposes effective measures for a long-term profitable investment strategy in IPOs.
Book Synopsis Initial Public Offerings: Findings and Theories by : Seth Anderson
Download or read book Initial Public Offerings: Findings and Theories written by Seth Anderson and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 126 pages. Available in PDF, EPUB and Kindle. Book excerpt: Initial public offerings (IPOs) play a crucial role in allocating resources in market economies. Because of the enormous importance of IPOs, an understanding of how IPOs work is fundamental to an understanding of financial markets generally. Of particular interest is the puzzling existence of high initial returns to equity IPOs in the United States and other free-market economies. Audience: Designed for use by anyone wishing to perform further academic research in the area of IPOs and by those practitioners interested in IPOs as investment vehicles.
Book Synopsis The Oxford Handbook of Entrepreneurial Finance by : Douglas Cumming
Download or read book The Oxford Handbook of Entrepreneurial Finance written by Douglas Cumming and published by OUP USA. This book was released on 2012-03-22 with total page 937 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a comprehensive picture of issues dealing with different sources of entrepreneurial finance and different issues with financing entrepreneurs. The Handbook comprises contributions from 48 authors based in 12 different countries.
Book Synopsis The Ernst & Young Guide to the IPO Value Journey by : Ernst & Young LLP
Download or read book The Ernst & Young Guide to the IPO Value Journey written by Ernst & Young LLP and published by Wiley. This book was released on 1999-10-22 with total page 312 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ernst & Young ist einer der führenden Finanzdienstleister in den USA. Dies ist die aktualisierte Version des Leitfadens zum Börsengang 'Ernst & Young Guide to Taking Your Company Public'. Ziel war es, leitende Angestellte anzusprechen, wobei der Schwerpunkt auf Emissionskursen (IPOs - Initial Offering Prices) liegt als Verfahren, das einen bedeutenden Einfluß auf Geschäftsoperationen haben wird. Ein praktisches Fachbuch mit wichtigen Informationen zum Börsengang, einschließlich neuer Arten von IPOs und Internetangeboten. (09/99)
Download or read book Going Public written by Tim Jenkinson and published by Oxford University Press, USA. This book was released on 2001 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: Going Public investigates why companies routinely underprice themselves as they try to list themselves on the stock exchange. They subsequently underperform over the long-term and, in Going Public, the authors explore these 2 phenomena in plain English.
Book Synopsis Initial Public Offerings – An inside view by : Rolf J. Daxhammer
Download or read book Initial Public Offerings – An inside view written by Rolf J. Daxhammer and published by UVK Verlag. This book was released on 2017-11-13 with total page 243 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a corporations financial life going public by means of an IPO is probably the single most important decision. It turns a private company into a public one. Our book will provide an inside view of the IPO process. On the one hand, it draws on the insights of an experienced investment banker, who has gone through numerous IPO transactions. On the other hand, it relates the story of an actual IPO through the eyes of a Chief Executive Officer who has taken two of his companies public. This unique double perspective is our books defining feature. We do not discuss initial public offerings in a textbook style fashion. What we would like to bring out is a more comprehensive portrayal of a once-in-a-lifetime event for most companies and their management, alike.
Book Synopsis Evidence on the Strategic Allocation of Initial Public Offerings by : Kathleen Weiss Hanley
Download or read book Evidence on the Strategic Allocation of Initial Public Offerings written by Kathleen Weiss Hanley and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The evidence reported in this paper suggests that institutional investors capture a large fraction of the short-run profits associated with IPOs. The favored status enjoyed by institutional investors in underpriced offerings appears, however, to carry a quot;quid pro quoquot; expectation that they will participate in less-attractive issues as well. This finding conforms with the notion that U.S. underwriters behave strategically in the allocation of IPOs.
Book Synopsis The Phenomenon of IPO Underpricing in the European and U.S. Stock Markets by : Oliver Reiche
Download or read book The Phenomenon of IPO Underpricing in the European and U.S. Stock Markets written by Oliver Reiche and published by Anchor Academic Publishing (aap_verlag). This book was released on 2014-06-23 with total page 105 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Initial Public Offering (IPO) marks one of the most important events of a company. Basically, the aim is to generate maximum proceeds by selling the company’s shares to investors. However, the shares that are sold seem to be underpriced as the price significantly soars on the first trading day. Since the very first detection of this phenomenon in the United States in 1969, several subsequent studies have documented the existence of worldwide IPO underpricing. This study focuses on IPO Underpricing in the European and United States Stock Markets by outlining and discussing the following essential issues: What is underpricing in the context of the IPO? Which motivations are there and how do they impact? Is there IPO underpricing in the markets of Europe and the United States of America?
Book Synopsis Initial Public Offerings by : Michelle Lowry
Download or read book Initial Public Offerings written by Michelle Lowry and published by . This book was released on 2017 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this monograph is to provide an overview of the IPO literature since 2000. The fewer numbers of companies going public in recent years has raised many questions regarding the IPO process, in both academic and regulatory circles. As we all strive to understand these changes in the market, it is especially important to understand the dynamics underlying the IPO process. If the process of going public is too costly or the IPO mechanism is plagued by too many conflicts of interest among the various intermediaries, then private companies may rationally choose other methods of raising capital. In a related vein, it is imperative that new regulations not be based on research focusing solely on large, more mature firms. Newly public firms have unique characteristics, and an increased understanding of such issues will contribute positively to well-functioning public markets and further growth of the entrepreneurial sector. We also provide a detailed guide to researchers on how to obtain a research-quality sample of IPOs, from standard data sources. Related to this, we tabulate important corrections to these standard data sources.
Book Synopsis IPOs and Equity Offerings by : Ross Geddes
Download or read book IPOs and Equity Offerings written by Ross Geddes and published by Elsevier. This book was released on 2003-06-06 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: An initial public offering (IPO) is one of the most significant events in corporate life. It follows months, even years of preparation. During the boom years of the late 1990s bull market, IPOs of growth companies captured the imagination and pocketbooks of investors like never before. This book goes behind the scenes to examine the process of an offering from the decision to go public to the procedures of a subsequent equity offering. The book is written from the perspective of an experienced investment banker describing the hows and whys of IPOs and subsequent equity issues. Each aspect of an IPO is illustrated with plenty of international examples pitched alongside relevant academic research to offer a combination of theoretical rigour and practical application. Topics covered are: - the decision to go public- legal and regulatory aspects of an offering; marketing and research- valuation and pricing- allocations of shares to investors - examination of fees and commissions* Global perpective: UK, European and US practices, regulations and examples, and case studies* First hand experience written by an IPO trader with academic rigour* Includes the changes in the market that resulted from 1998-2000 equity boom
Download or read book The IPO Decision written by Jason Draho and published by Edward Elgar Publishing. This book was released on 2004-01-01 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt: Annotation Initial public offerings (IPOs) garnered unprecedented positive attention in the 1990s for their spectacular returns and central role in entrepreneurial activity. Subsequent revelations of unscrupulous IPO allocation and promotion practices cast a less fa.
Book Synopsis Variables Influencing the Severity of IPO Underpricing: An Empirical Analysis of the German Market by : Justyna Dietrich
Download or read book Variables Influencing the Severity of IPO Underpricing: An Empirical Analysis of the German Market written by Justyna Dietrich and published by Diplomica Verlag. This book was released on 2012-03 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: Underpricing refers to the phenomenon of abnormal first-day returns from initial public offerings (IPOs). Without doubt, any US investor would agree that one day-returns of 11.4% on average are exceptional and a worthwhile investment. Since then many studies have proven that it is a persistent phenomenon and also occurs on markets all over the world. The most puzzling question for scientists is why companies are leaving this money on the table and do not set an offering price that reflects the market demand at the offering date. The main focus of this paper is whether and how the findings of past research, primarily conducted for the US market, apply to the German IPO market. As a result, both investors and issuers shall receive practical implications for their decision-making within the IPO process. This study comprises a brief description of some important theoretical aspects that shape the price setting of an IPO. It focuses on business valuation as it is the basis for setting the price of an IPO. Furthermore, the most common price setting mechanisms are explained. Past research results and theories with regard to IPO underpricing will be outlined and put into relation to the upcoming analysis. This also includes the long-run performance of IPOs and deals especially with the question of whether IPOs are systematically overvalued by investors and, if so, why. The empirical analysis consists of a deduction of influencing variables and an applying theoretical model. Finally, OLS results will be presented and interpreted, which also includes practical implications for both, issuers and investors.
Book Synopsis Signaling by Underpricing the Initial Public Offerings of Primary Listings in an Emerging Market by : Ales Cornanic
Download or read book Signaling by Underpricing the Initial Public Offerings of Primary Listings in an Emerging Market written by Ales Cornanic and published by . This book was released on 2013 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: The signaling hypothesis suggests that firms have incentives to underprice their initial public offerings (IPOs) to signal their quality to the outside investors and to issue seasoned equity (SEO) at more favorable terms. While the initial empirical evidence on the signaling hypothesis was weak, Francis et al. (2010) show that foreign firms from segmented (rather than integrated) markets strategically underprice their IPO in U.S. markets to distinguish themselves from the weaker players. Hence, the attractiveness of the signaling strategy seems to be related to the a priori level of information asymmetry. We examine the use of signaling in an emerging market where the information asymmetry is likely to be higher relative to an established market. Using a sample of 158 Polish IPOs from 2005 - 2009, we show that firms that underprice their IPOs are more likely (i) to issue seasoned equity, (ii) to issue a larger portion of equity at the SEO, and (iii) to make the SEO sooner after the IPO, all of which are consistent with the signaling hypothesis. This evidence suggests that the results of Francis et al. (2010) are not limited to IPOs made by foreign firms in an established market, but they can be extended to primary listings by domestic firms in markets where the information asymmetry is sufficiently large for the benefit of the signal to outweigh its cost.
Book Synopsis Initial Public Offering by : Richard P. Kleeburg
Download or read book Initial Public Offering written by Richard P. Kleeburg and published by Cengage Learning. This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This short book, a miniature encyclopedia about the initial public offering (IPO), provides a survey of the field, perhaps best suited for those who are new to the subject. Even though some of his sentences are a bit tangled, getAbstract finds that author Richard P. Kleeburg provides a handy, iceberg-tips introduction to the complexities surrounding IPOs, including a rundown of their advantages and disadvantages, key players and business requirements. He includes a useful bibliography for those who want to take the next step into a deeper understanding of the field.
Book Synopsis A Survey of the European IPO Market by :
Download or read book A Survey of the European IPO Market written by and published by CEPS. This book was released on 2006 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt:
