Download or read book The Effect of Differences of Opinion and Market Conditions on the Pricing of IPOs by Investment Banks written by Michael O'Connor Keefe and published by . This book was released on 2012 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: I model the pricing decision of an investment bank that manages a book-built IPO and faces a stochastic downward sloping demand curve for the firm's IPO shares. The model distinguishes between the effect of differences of opinion and valuation uncertainty on the pricing decision of the investment bank and hence average IPO initial returns. Without relying upon information asymmetries between agents, the model predicts several empirical regularities: average positive initial returns, the ubiquitous use of the over-allotment option, partial adjustment of offer prices to observable information, and extreme initial returns in a bubble. The model provides insight into the how investment banks interpret and price information. For example, news stories about the IPO firm attract potential new investors, many of which are plausibly sentiment investors. My model shows two effects of news stories on the stochastic demand curve. First, the new investors cause an outward shift out in the demand curve. Second, the new investors, many of whom are sentiment investors, increase valuation uncertainty. The investment bank raises the offer price due to the shift in demand caused by news stories, but only partially because of the increase in valuation uncertainty.
Download or read book IPO Pricing as a Function of Your Investment Banks Past Mistakes written by Laurie Krigman and published by . This book was released on 2016 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: On May 18, 2012 Facebook held its initial public offering (IPO), raising over $16 billion making it one of the largest IPOs in history. To the surprise of many investors, there was no underpricing -- the stock closed the first day of trading flat from its offer price. The Facebook IPO was described as not only disappointing but also detrimental to the broader market. We explore why one IPO should have such widespread consequences. We document that the IPO market was silent for 41 days following Facebook. When it re-opened 41 days later, the average level of underpricing increased from 11% pre-Facebook to 20% post-Facebook. The common blame was an overall increase in risk-aversion among investors. We offer an alternative explanation. We show that the entire increase in underpricing is concentrated in the IPOs of the Facebook lead underwriters. We find no statistical difference in underpricing pre and post-Facebook for non-Facebook underwriters. We argue that investment bank loyalty to their institutional investor client based propelled the Facebook underwriters to increase underpricing to compensate for the perceived losses on Facebook.
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 Oxford Handbook of IPOs written by Douglas Cumming and published by Oxford University Press. This book was released on 2018-11-15 with total page 841 pages. Available in PDF, EPUB and Kindle. Book excerpt: Initial public offerings (IPOs), or new listings of companies on stock exchanges, are among the most important form of finance and generate considerable attention and excitement. They are used to raise capital or to monetize investments by the early generation of venture capital and other private investors. They are increasingly international in scope and reach, especially with non-American firms offering on American stock exchanges. This handbook provides a comprehensive overview of why companies list on stock exchanges, how IPOs are regulated, initially valued, and their performance in the short and long run. The first part examines the economics of IPOs, and offers statistics and regulatory insights from the United States and other countries around the world. The volume then covers mergers versus IPOs, as well as reverse mergers and special purpose acquisition companies. Part III analyzes institutional ties in IPOs, including analysts, investment banks, auditors, and venture capitalists. The fourth section provides international perspectives on IPOs from a number of countries around the world. Part V discusses alternatives to IPOs, including private marketplaces, and crowdfunding. Reflecting the range of disciplines that analyze IPOs, the contributors come from the fields of finance, international business and management, economics, and law. The chapters cover the latest information on a range of fundamental questions that are of interest to academics, practitioners, and policymakers alike.
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.
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
Download or read book Risk Reputation and the Price Support of IPOs written by Katharina Lewellen and published by . This book was released on 2003 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt: Immediately following public offerings, underwriters often repurchase shares of poorly performing IPOs in an apparent attempt to stabilize the price. Using proprietary Nasdaq data for a large sample of IPOs, I study the price effects and cross-sectional determinants of price support. Some of the key findings are: (1) Price stabilization is substantial, inducing significant price rigidity at and below the offer price. Stabilization appears, at least in the short run, to raise the equilibrium stock price. (2) Many studies suggest that stabilization helps to mitigate information asymmetry problems in the IPO market. I find no evidence that stocks with larger ex-ante information asymmetries are stabilized more strongly. (3) The characteristics of the lead underwriter emerge as the strongest determinants of price support. Larger and more reputable investment banks stabilize more, perhaps to protect their reputations with investors. But there are substantial differences in price support even among the largest underwriters (after controlling for IPO characteristics and underwriter size). (4) Investment banks with retail brokerage operations stabilize much more than other large investment banks. This puzzling result seems inconsistent with the common view that stabilization benefits primarily institutional investors, and I outline and examine several alternative explanations. Keywords: IPOs, price support, stabilization, investment banks, reputation.
Download or read book Handbook of Research on IPOs written by Mario Levis and published by Edward Elgar Publishing. This book was released on 2013-11-29 with total page 599 pages. Available in PDF, EPUB and Kindle. Book excerpt: The chapters offer some important new insights into issues that will be of interest not only to the academic community but also to professionals involved in the preparation, structure and execution of such transactions, market regulators, and private a
Download or read book Investment Banking written by Joshua Pearl and published by John Wiley & Sons. This book was released on 2013-05-28 with total page 496 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investment Banking, UNIVERSITY EDITION is a highly accessible and authoritative book written by investment bankers that explains how to perform the valuation work at the core of the financial world. This body of work builds on Rosenbaum and Pearl’s combined 30+ years of experience on a multitude of transactions, as well as input received from numerous investment bankers, investment professionals at private equity firms and hedge funds, attorneys, corporate executives, peer authors, and university professors. This book fills a noticeable gap in contemporary finance literature, which tends to focus on theory rather than practical application. It focuses on the primary valuation methodologies currently used on Wall Street—comparable companies, precedent transactions, DCF, and LBO analysis—as well as M&A analysis. The ability to perform these methodologies is especially critical for those students aspiring to gain full-time positions at investment banks, private equity firms, or hedge funds. This is the book Rosenbaum and Pearl wish had existed when we were trying to break into Wall Street. Written to reflect today’s dynamic market conditions, Investment Banking, UNIVERSITY EDITION skillfully: Introduces students to the primary valuation methodologies currently used on Wall Street Uses a step-by-step how-to approach for each methodology and builds a chronological knowledge base Defines key terms, financial concepts, and processes throughout Provides a comprehensive overview of the fundamentals of LBOs and an organized M&A sale process Presents new coverage of M&A buy-side analytical tools—which includes both qualitative aspects, such as buyer motivations and strategies, along with technical financial and valuation assessment tools Includes a comprehensive merger consequences analysis, including accretion/(dilution) and balance sheet effects Contains challenging end-of-chapter questions to reinforce concepts covered A perfect guide for those seeking to learn the fundamentals of valuation, M&A , and corporate finance used in investment banking and professional investing, this UNIVERSITY EDITION—which includes an instructor’s companion site—is an essential asset. It provides students with an invaluable education as well as a much-needed edge for gaining entry to the ultra-competitive world of professional finance.
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.
Download or read book Issues in IPO Valuations written by Heather Nicole Rhodes and published by . This book was released on 2014 with total page 203 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation focuses on the effect of regulation and asymmetric information problems in the market for initial public offerings (IPOs). It consists of three essays that evaluate different aspects of the impact of regulation and asymmetric information problems on IPO valuations and pricing. The first essay retests the signaling and agency theories with a matched-sample of IPOs prior to and following the passage of the Sarbanes-Oxley Act of 2002 (SOX). Because the wealth effect could affect the results of these tests, it is also evaluated. The study is motivated by the potential impact of SOX-related governance and reporting requirements on the relative importance of adverse selection and moral hazard problems, with which the signaling and agency theories are respectively concerned, in the market for IPOs. Additionally, SOX may have affected the types of firms going public and ultimately the relative importance of adverse selection and moral hazard. Results on both the pre- and post-SOX samples are consistent with the signaling theory and evidence of a wealth effect exists in both eras, although it is more significant post-SOX. However, in contrast to results of studies conducted prior to SOX, both the pre- and post-SOX results give little credence to the agency theory, suggesting that SOX has not impacted investors' concerns regarding moral hazard. Rather, the difference between the pre-SOX results and the results of other studies conducted prior to SOX suggests that SOX appeared to reduce moral hazard concerns only through its effect on the self-selection of firms going public. The second essay utilizes a matched sample of IPOs prior to the passage of SOX and those issued after the passage of the Act to examine the role of the board structure provisions of the Act on firm value as well as the Act's general valuation consequences. We provide evidence that SOX has negatively impacted the IPO market by suppressing the number of yearly issuances, particularly deterring small issuers from entering public equity markets, and imposing binding constraints on board structure through the new exchange listing requirements. We document not only that firms going public post-SOX are much different than those going public pre-SOX, but also in matched sample comparisons, the Act does not appear to provide any valuation benefit. In particular, compliance with the board structure provisions provides no benefit and a post-SOX dummy is negative for some valuation measures. SOX thus appears to have imposed costs that prohibit many small firms from issuing IPOs, without a corresponding benefit for those that do issue. The third essay analyzes the relationship between the supply of institutional investor capital and IPO pricing. It is motivated by the recent literature documenting the importance of institutional investment to the cost of raising equity capital and the tendency of professional money managers to mimic one another's trades. I propose that institutional investment in an industry may influence the pricing of initial public offerings through the effects of competition on the pricing process, particularly by affecting the Benveniste and Spindt (1989) partial adjustment process. I hypothesize that the level and concentration in institutional investment in an industry in which an issuer operates serves as a proxy for the competitiveness of the supply of capital in that industry, and that relatively higher levels of competition reduce the need for partial adjustment. Additionally, in more competitive markets, offer price updates should be larger and initial returns should be relatively lower. The results suggest support for these hypotheses. In more competitive markets, there is less partial adjustment, offer price revisions are larger and initial returns are lower. The results on partial adjustment and offer price revisions are robust to controlling for endogeneity issues, while the results on initial returns are substantially weaker once endogeneity is addressed.
Download or read book Empirical Evidence on IPO Underpricing written by Marius Hamer and published by GRIN Verlag. This book was released on 2008 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diploma Thesis from the year 2007 in the subject Business economics - Investment and Finance, grade: 1,3, European Business School - International University Schlo Reichartshausen Oestrich-Winkel, 80 entries in the bibliography, language: English, abstract: This paper aims at establishing a link between the average level of initial return of IPO shares, existing underpricing explanations and the dot-com bubble. In years prior to the boom of the new economy, underpricing was explained by various theories, which have extensively been developed since decades. However, in the years 1998 to 2001 IPOs were overly underpriced, leading to assumptions about behavioural aspects and investor irrationality. Analysing a comprehensive dataset of 371 IPOs on the Frankfurter B rse between 1997 and 2007, this paper aims at providing evidence that the observed lower levels of initial returns in recent years can indeed be aligned with existing theories on the basis of rational behaviour of market participants. Firstly, the IPO process and its major participants will be presented followed by a review of relevant studies on the IPO phenomenon. In the next step, established underpricing theories are recapitulated. A descriptive analysis of the data sample points out the particularities concerning the company and transaction characteristics of the sample firms. In a last step, a regression analysis relates various proxies for information asymmetry to established underpricing theories. It gives reason to believe that the irrationality at the turn of the century has vanished and that underpricing can again be explained by established theories.
Download or read book The Phenomenon of IPO Underpricing in the European and U S Stock Markets written by Oliver Reiche and published by diplom.de. This book was released on 2014-06-01 with total page 102 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?
Download or read book Examining the IPO Process written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs. Subcommittee on Securities, Insurance, and Investment and published by . This book was released on 2013 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Ipo Pricing and Allocation written by Tim Jenkinson and published by . This book was released on 2007 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the central importance of investors to all IPO theories, relatively little is known about their role in practice. In this paper we survey institutional investors about how they assess IPOs, what information they provide to the investment banking syndicate, and the factors they believe influence allocations. Although the theoretical IPO literature has tended to focus on information revelation, the survey raises doubts as to the extent of incremental information production and whether bookrunners are, in practice, able to infer investors' valuations from their bids. We find that investor characteristics, in particular broking relationships with the bookrunner, are perceived to be the most important factors influencing allocations, which supports the view that IPO allocations are part of implicit quid pro quo deals with investment banks.
Download or read book Inside IPOs written by Richard J. Peterson and published by McGraw-Hill Companies. This book was released on 2001 with total page 280 pages. Available in PDF, EPUB and Kindle. Book excerpt: "From precipitous drops after opening day run-ups to steady gains after opening day disappointments, Inside IPOs explains what to watch for in an IPO's price movement and how to keep profits while protecting against losses. It analyzes the performance of numerous respected sectors - from retailing and healthcare to natural resources and leisure pursuits - and reveals which promise to deliver strong performance well into the 21st century." "Whether you are looking to add initial public offerings to your investment mix or simply want to learn more about one of today's most well-known yet little-understood investment phenomena, Inside IPOs is today's most even-handed and timely report on the risks and rewards of IPO investing."--BOOK JACKET.
Download or read book Empirical Study of Market Conditions and IPOs Public Offerings written by Halil Kaya and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the relation between the financial market conditions (i.e. interest rates) and the initial public offering (i.e., IPO) activity. Using robust regressions and finds that the change in the level of interest rates over the previous four quarters explains the size of the offering. Firms tend to do a bigger IPO when interest rates are low compared to the rates four quarters ago. Further that the IPO market becomes more active (i.e., more firms coming to the market) when interest rates are low compared to the rates four or eight quarters ago. Finally, the long-run (i.e. up to five years) impact of IPO market timing on issuing firms' capital structure is examined and it is found that market timing does not have a persistent impact on issuing firms' capital structure.
