Information Cascades among Investors in Equity Crowdfunding

2018 ◽  
Vol 42 (3) ◽  
pp. 467-497 ◽  
Author(s):  
Silvio Vismara
Keyword(s):  
Social Networks ◽  
Initial Public Offering ◽  
Crucial Role ◽  
Individual Investors ◽  
Information Cascades ◽  
Equity Offerings ◽  
Equity Crowdfunding ◽  
Retail Investors ◽  
Public Offering

Finance studies on information cascades, usually in an initial public offering setting, typically differentiate between institutional and retail investors, as this is the only information available to potential backers. Information available through equity crowdfunding platforms includes details on individual investors as they may disclose information about themselves by linking their profile to social networks or websites. Using a sample of 132 equity offerings on Crowdcube in 2014, we show that information cascades among individual investors play a crucial role in crowdfunding campaigns. Investors with a public profile increase the appeal of the offer among early investors, who in turn attract late investors.

scholarly journals A Machine Learning Portfolio Allocation System for IPOs in Korean Markets Using GA-Rough Set Theory

2019 ◽  
Vol 11 (23) ◽  
pp. 6803
Author(s):  
Jiwoo Kim ◽  
Sanghun Shin ◽  
Hee Soo Lee ◽  
Kyong Joo Oh
Keyword(s):  
Machine Learning ◽  
Set Theory ◽  
Initial Public Offering ◽  
Rough Set ◽  
Rough Set Theory ◽  
Investment Strategy ◽  
Portfolio Allocation ◽  
Individual Investors ◽  
Rule Sets ◽  
Public Offering

An initial public offering (IPO) is a type of public offering in which a company’s shares are sold to institutional and individual investors. While the majority of studies on IPOs have focused on the efficiency of raising capital and price adequacy in IPOs, studies on portfolio allocation strategies for IPO stocks are relatively scarce. This paper develops a machine learning investment strategy for IPO stocks based on rough set theory and a genetic algorithm (GA-rough set theory). To reduce issues of information asymmetry, we use nonfinancial data that are publicly available to individual and institutional investors in the IPO process. Based on the rule sets generated from the training sets, we conduct 120 tests with various conditions involving the target days and the partition of the training and testing sets, and we find excess returns of the constructed portfolios compared to the benchmark portfolios. Investors in IPO stocks can formulate more efficient investment strategies using our system. In this sense, the system developed in this paper contributes to the efficiency of financial markets and helps achieve sustained economic growth.

Family Business Group Expansion Through IPOs: The Role of Internal Capital Markets in Financing Growth While Preserving Control

2020 ◽  
Vol 66 (11) ◽  
pp. 5191-5215
Author(s):  
Ronald W. Masulis ◽  
Peter K. Pham ◽  
Jason Zein
Keyword(s):  
Initial Public Offering ◽  
Family Business ◽  
Capital Markets ◽  
Market Access ◽  
Scale Up ◽  
Seasoned Equity Offerings ◽  
Equity Offerings ◽  
Internal Capital ◽  
Family Business Group ◽  
Public Offering

Using data from 44 countries, we document a new channel through which a family business group’s internal capital market supports its members. We find that groups use internal capital to incubate difficult-to-finance projects, making it feasible for them to rapidly scale up, thus facilitating their initial public offering (IPO) market access. This IPO support role is particularly valuable when groups find capital-raising through seasoned equity offerings less attractive because of control-retention concerns and in capital markets with high new-firm financing barriers. Unlike carve-outs employed as a corporate restructuring strategy, group-affiliated IPOs primarily appear to serve a group’s expansion goals rather than its liquidation needs. This paper was accepted by Gustavo Manso, finance.

Crowdfunding

2018 ◽  
pp. 719-745
Author(s):  
Alexandra Horváthová
Keyword(s):  
United States ◽  
European Union ◽  
Venture Capital ◽  
Initial Public Offering ◽  
The United States ◽  
Common Denominator ◽  
The European Union ◽  
Equity Crowdfunding ◽  
Legal Challenges ◽  
Public Offering

Crowdfunding is a way of raising money through small contributions from a large number of investors, i.e. a “crowd.” Crowdfunding constitutes a common denominator for a number of financing methods, from donations through lending up to venture capital, all taking place online. Therefore, there are numerous legal challenges, namely use of copyright, distribution of loans and credits, or possible sale of securities. This chapter focuses on the development of equity crowdfunding, which shows many similarities with classical initial public offering (IPO) as a financing tool, yet on a smaller scale. The chapter analyzes the existing regulatory framework of equity crowdfunding in the United States and in the European Union.

scholarly journals PERBEDAAN EQUITY CROWDFUNDING DAN INITIAL PUBLIC OFFERING (IPO) DALAM HUKUM PASAR MODAL INDONESIA

2021 ◽  
Vol 5 (2) ◽  
Author(s):  
Widya Rahmadhani
Keyword(s):  
Initial Public Offering ◽  
Capital Market ◽  
Financial Services ◽  
Secondary Data ◽  
Main Concept ◽  
Normative Study ◽  
Equity Crowdfunding ◽  
Rule Number ◽  
Documentary Studies ◽  
Public Offering

Equity Crowdfunding is newly known in Indonesia. Indonesia’s Financial Services Authority passed new regulation that regulating Equity Crowdfunding through Indonesia Financial Services Authorities Rule Number 37/POJK.04/2018 regarding Equity Crowdfunding. Equity Crowdfunding concept considered similar to Initial Public Offering (IPO). Further, this research objective is to analyze Equity Crowdfunding from Indonesia’s Capital Market Law Perspective to find out if Equity Crowdfunding is remarkably similar to Initial Public Offering (IPO). This research is a normative study using documentary studies in the form of secondary data. The research was found that although there are similarities on the main concept between Equity Crowdfunding and Initial Public Offering, the two has distinguishing power. The research also found that there are some risks awaiting on the Equity Crowdfunding scheme.

scholarly journals The Pricing of Assurance Services in Secondary Equity Offerings

2005 ◽  
Vol 20 (3) ◽  
pp. 187-207 ◽  
Author(s):  
Neil L. Fargher ◽  
Brian W. Mayhew ◽  
Michael Wilkins
Keyword(s):  
Initial Public Offering ◽  
Empirical Model ◽  
Inverse Relationship ◽  
Audit Fees ◽  
Equity Offerings ◽  
Assurance Services ◽  
Audit Period ◽  
Public Offering ◽  
The Relationship

This paper examines the pricing of assurance services in secondary equity offerings (SEOs). Our empirical model extends initial public offering (IPO) fee specifications to include variables that are unique to, or more relevant for, secondary offerings. We document an inverse relationship between SEO fees and a client's ability to delay its secondary offering, suggesting that auditors do not charge as much for SEOs made by relatively mature firms. The relationship reverses, however, when the client is required to use more comprehensive types of filings (i.e., when assurance effort is higher). We also show that fees are higher when the SEO comes to market during the client's annual audit period. This finding is consistent with the shifting of year-end audit fees to SEO engagements in an effort to boost earnings for both clients and auditors (at the expense of shareholders). We cannot, however, unambiguously conclude that fee shifting exists, as the observed fee premium could be explained by other factors.

How accurate are A-REIT IPO dividend forecasts?

2019 ◽  
Vol 38 (1) ◽  
pp. 47-55 ◽  
Author(s):  
Bill Dimovski ◽  
Rebecca Ratcliffe ◽  
Christopher Ratcliffe ◽  
Monica Keneley ◽  
Scott Salzman
Keyword(s):  
Initial Public Offering ◽  
Forecast Errors ◽  
Forecast Period ◽  
Content Type ◽  
Retail Investors ◽  
Investment Opportunities ◽  
Regression Approach ◽  
Public Offering ◽  
Practical Implications ◽  
Industrial Company

Purpose The purpose of this paper is to investigate the accuracy of Australian Real Estate Investment Trust (A-REIT) initial public offering (IPO) dividend forecasts between 1994 and 2016. Design/methodology/approach This study compares the dividend forecasts of A-REIT IPOs for the first dividend forecast period in the prospectus, with the actual dividend declared for that forecast period. As well as simple descriptive summary measures, this study also employs an exact logistic regression approach to examine the factors that might influence the IPOs achieving or exceeding the dividend forecast. Findings The study identifies that the dividends declared, on average, were greater than the dividend forecast and that more than nine out of ten of the IPOs listed after 1999 achieved or exceeded their prospectus forecast. In addition the authors observe positive mean forecast errors, suggesting dividend forecasts in A-REIT IPOs, are cautiously biased. This is in contrast to the industrial company data reported in Brown et al. (2000) which suggest dividend forecasts are optimistically biased. The study also finds the A-REIT IPOs that did not forecast a dividend, generally did not pay a dividend. Practical implications The results will inform dividend seeking institutional and retail investors of the investment opportunities in A-REIT IPOs. Originality/value This paper adds to the discussion of the relative predictability of dividends of A-REIT IPOs compared to industrial company IPOs.

SPAC investment schemes’ sustainability is doubtful

2021 ◽  
Keyword(s):  
Initial Public Offering ◽  
Hedge Funds ◽  
Private Equity ◽  
Private Companies ◽  
Content Type ◽  
Public Company ◽  
Retail Investors ◽  
Public Offering

Significance Their promoters claim that they offer private companies a cheaper, faster and more certain path to becoming a public company than by taking the traditional route of an initial public offering (IPO). Impacts The regulatory leniency afforded SPACs by being governed by merger, not public offering rules, is a loophole that may be closed. SPACs are dubbed 'poor man's private equity', but their non-sponsor shareholders are mostly hedge funds, not retail investors. Most initial investors in SPACs exit before the merger, necessitating new equity to be raised, which undermines the premise of the model.

scholarly journals The Impact on IPO Assurance Fees of Commercial Bank Entry into the Equity Underwriting Market

2000 ◽  
Vol 19 (s-1) ◽  
pp. 23-35 ◽  
Author(s):  
Neil L. Fargher ◽  
L. Paige Fields ◽  
Michael S. Wilkins
Keyword(s):  
Commercial Bank ◽  
Initial Public Offering ◽  
Commercial Banks ◽  
The United States ◽  
Litigation Risk ◽  
Equity Offerings ◽  
Accounting Firms ◽  
Bank Equity ◽  
Public Offering ◽  
The Impact

Changes in the provisions of the United States Banking Act of 1933 have allowed the entry of commercial banks into the initial public offering (IPO) underwriting market. In this paper, we examine the effect of commercial bank equity underwriting on the fees paid to auditors. We predict that IPO assurance fees will be higher for equity offerings underwritten by commercial banks than for offerings handled by traditional underwriters because (1) commercial banks are relatively inexperienced in bringing firms public, requiring additional assistance from accounting firms in the IPO process; (2) new entrants into the underwriting market may manage lower quality issues that require additional assurance services; and/or (3) since commercial banks have greater resources than do traditional investment banks, they are likely to be exposed to greater litigation risk, providing incentives for commercial bank underwriters to ensure that the IPO firm purchases greater assurance from the auditor. However, we expect fees to decrease if a previous lending relationship existed between the commercial bank and its client. Our findings, based on a sample of issues brought to market between 1991 and 1997, support these expectations.

Reallocation of IPO shares: emerging market evidence

2018 ◽  
Vol 14 (4) ◽  
pp. 414-432
Author(s):  
Kavita Wadhwa ◽  
Sudhakara Reddy Syamala
Keyword(s):  
Initial Public Offering ◽  
Factor Model ◽  
Emerging Market ◽  
Regulatory Regime ◽  
Content Type ◽  
Long Run ◽  
Retail Investors ◽  
Show Evidence ◽  
Public Offering ◽  
High Level

Purpose The purpose of this paper is to study the reallocation of initial public offering (IPO) shares to retail investors, non-institutional buyers (NIBs) and qualified institutional buyers (QIBs). The authors examine how the reallocation process is related to the pricing decision of the underwriter. The authors also examine the long-run performance of the IPOs classified on the basis of the highest reallocation by retail investors, NIBs and QIBs. Design/methodology/approach The authors use regression analysis as well as 2SLS and three-stage least squares models to test the hypotheses. For long-run performance analysis, the authors adopt Carhart’s (1997) four-factor model. Findings First, the authors provide evidence that the reallocation of IPO shares for retail investors, NIBs and QIBs is frequent. Second, all three categories of investors are treated differently in the reallocation of underpriced shares. Third, the authors find that the reallocation and pricing strategies are interdependent and both the strategies are used by the underwriter to reward and favor retail investors for showing high level of demand. The authors find that in India, underwriters reward retail investors. Lastly, even though underwriters favor retail investors for reallocation, the authors find that IPOs which receive highest reallocation to retail investors perform poorly in the long run. Originality/value This paper is the first paper to show evidence of reallocation of IPO shares by underwriters for an emerging market. The paper is different from other papers as the regulatory regime present in the Indian markets is different from other markets.

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