The Geography of Institutional Investors, Information Production, and Initial Public Offerings

2016 ◽  
Author(s):  
Thomas J. Chemmanur ◽  
Jiekun Huang ◽  
Yuyuan Zhu
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Information Production ◽  
Public Offerings

scholarly journals Back to the Origins of the Initial Public Offerings Price Range: Underwriter-Funds Network and Information Production Timeline

2020 ◽  
Vol 12 (11) ◽  
pp. 91
Author(s):  
Camilla Mazzoli ◽  
Claudia Pigini ◽  
Sabrina Severini
Keyword(s):  
Mixture Model ◽  
Initial Public Offerings ◽  
Institutional Investors ◽  
Due Diligence ◽  
Information Production ◽  
Fair Dealing ◽  
Public Offerings ◽  
Safe Harbour ◽  
Price Range ◽  
Initial Price

Although the initial price range in U.S. Initial Public Offerings (IPOs) is constrained by SEC regulations, a non-negligible percentage of IPO price ranges falls outside the ‘safe harbour’. We investigate how the price range - which sends the very first signals on the IPO quality to the market - is set in the due diligence phase, with special attention to unexplored networking patterns between underwriters and institutional investors. By making use of a Mixture Model applied to 1,246 US firms listed between 2004 and 2016, we show that underwriters that are centrally positioned in their network of regular investors are more likely to set a price range that is compliant with SEC guidelines. We argue that the flexibility resulting from being safe harbour-compliant allows underwriters to preserve their reputation for fair dealing with issuers by exploiting a dumping ground proviso or quid pro quo agreements with their network funds. Despite information produced by network funds in the due diligence step having no significant effect on the width of the price range, in our study, we provide evidence that the range does serve as a proxy of the uncertainty of the listing firms.

Does Sentiment Drive the Retail Demand for IPOs?

2009 ◽  
Vol 44 (1) ◽  
pp. 85-108 ◽  
Author(s):  
Daniel Dorn
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Equity Offerings ◽  
Public Offerings ◽  
Trading Decisions ◽  
Retail Trading ◽  
Public Equity ◽  
Retail Demand ◽  
As If

AbstractIndividual and institutional investors can trade German initial public equity offerings on an as-if/when-issued basis before the start of secondary trading. Using actual when-issued trades made by a sample of clients at a large German retail broker during 1999 and 2000, the paper documents that retail buyers consistently overpay for initial public offerings (IPOs) in the when-issued market relative to the immediate aftermarket. The observed willingness to overpay points to sentiment as a driver of retail trading decisions. Consistent with this interpretation and with sentiment affecting prices, IPOs that are aggressively bought by individuals in the when-issued market exhibit high first-day returns as well as poor aftermarket returns relative to benchmarks of similar stocks.

Institutional ownership of dual-class companies

2021 ◽  
Vol 13 (2) ◽  
pp. 206-222
Author(s):  
Jonathan J. Burson ◽  
Marlin R.H. Jensen
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Value Added ◽  
Institutional Ownership ◽  
Voting Rights ◽  
Class Structure ◽  
Content Type ◽  
Public Offerings ◽  
Advantages And Disadvantages ◽  
Dual Class

Purpose This study aims to examine institutional ownership of companies that go public with dual-class share structures. Design/methodology/approach Several recent studies have discussed the potential advantages and disadvantages of the dual-class structure, which allows founders and insiders to maintain control of the firms they created through superior voting rights. Institutional investors oppose the dual-class structure, arguing that inferior voting rights make it difficult to respond to poor governance or performance. Previous research has shown the early value-added to the dual-class firm declines through time. This study examines institutional ownership of dual-class companies through time and compares institutional investments in initial public offerings with perpetual superior-class structures versus those with provisions to sunset those shares to one-share, one-vote structures. Findings Evidence suggests that institutional investors view perpetual dual-class structures as potentially riskier in terms of poor governance or performance and prefer dual-class companies with sunset provisions. Originality/value This study suggests that founders and insiders should consider either the dual-class structure with a sunset provision or if they choose the perpetual dual-class, it should include some type of event-driven safeguards.

The Role of Institutional Investors in Initial Public Offerings

2010 ◽  
Vol 23 (12) ◽  
pp. 4496-4540 ◽  
Author(s):  
Thomas J. Chemmanur ◽  
Gang Hu ◽  
Jiekun Huang
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Public Offerings

scholarly journals IPO Pricing and Dealers’ Interaction: A Stochastic Frontier Approach

2020 ◽  
Vol 14 (1) ◽  
pp. 1
Author(s):  
Marco Cucculelli ◽  
Manuela Geranio ◽  
Camilla Mazzoli ◽  
Sabrina Severini
Keyword(s):  
Initial Public Offerings ◽  
Institutional Investors ◽  
Stochastic Frontier ◽  
Fair Value ◽  
Investment Banks ◽  
Stochastic Frontier Approach ◽  
Market Pricing ◽  
Public Offerings ◽  
Ipo Pricing ◽  
The Impact

This study investigates the impact of ongoing relationships between underwriters and institutional investors on Initial Public Offerings (IPO) pricing. Differently from previous studies that are focused on allocations of underpriced shares we propose a model of primary market pricing in which the incomplete adjustment of the offer price to its maximum achievable level depends on the intensity of interactions that occurred between players in the years before the IPO. Using a stochastic frontier approach on a sample of 1 677 US IPOs between 2000 and 2016 the paper shows that the more investment banks and investors regularly work together the more the IPO offer price is set closer to the fair value of the issuing firm. This analysis helps to disentangle the ambiguous effects of underwriters’ discretion on IPO primary market pricing when bookbuilding is used. We then support the idea that banks can maximize value to issuers by fostering a regular clientele of investors.

Allocation discretion, price discounts and returns in Turkish initial public offerings

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lokman Tutuncu
Keyword(s):  
Least Squares ◽  
Initial Public Offerings ◽  
Institutional Investors ◽  
Ordinary Least Squares ◽  
Foreign Investors ◽  
Content Type ◽  
Public Offerings ◽  
Price Discounts ◽  
Retail Investors ◽  
Research Period

Purpose This study aims to investigate whether underwriters exercise their allocation discretion to offer favorable discounts to institutional investors. Design/methodology/approach The research covers 173 offerings at Borsa Istanbul between 2010 and September 2021. Two hypotheses related to allocation discretion are developed and tested by means of probit, ordinary least squares and two-stage least squares regressions. Heckman selection regressions are used for robustness tests. Findings Allocation discretion is catered toward institutional investors who account for more than 56% of all initial allocations adjusted by gross proceeds. Close to 84% of all gross proceeds come from offerings that allocation discretion is exercised. These discretionary offerings are sold with larger price discounts, yet provide lower initial returns, while evidence points to reallocation to retail investors due to weak demand from institutional investors. Research limitations/implications Despite using the population of firms in the research period, the sample size is small relative to more developed markets. The research period cannot be extended because allocation discretion is allowed in 2010. Practical implications The research highlights the importance of institutional and foreign investors to the equity markets. This issue is relevant due to the ongoing flight of foreign investors from emerging economies and the increasing participation of small investors in the stock markets. Social implications The study cautions retail investors against greater (re)allocations by underwriters who may seek to compensate for the loss of their foreign investor base and urges policymakers to regain foreign investors. Originality/value To the best of the authors’ knowledge, this is the first research paper to use actual discounts disclosed in the prospectus to test the predictions related to allocation discretion. The study also contributes to the emerging markets literature by documenting allocation practices of the Turkish underwriters for the first time.

Sign in / Sign up

Export Citation Format

Share Document