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Penny Stock IPOs

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Author Info

  • Daniel J. Bradley
  • John W. Cooney Jr.
  • Steven D. Dolvin
  • Bradford D. Jordan

Abstract

We examine underpricing, long-run returns, lockup periods, and gross spreads for penny stock IPOs over the 1990-1998 period. We find that penny stock IPOs have higher initial returns than ordinary IPOs, but significantly worse long-run underperformance. We also find that penny stock IPOs have longer lockup periods and larger gross spreads. To explore the effect of potential market manipulation, we examine IPOs led by a group of underwriters that were the subject of SEC enforcement actions and/or other penalties. Penny stock issues led by these banks are particularly underpriced and underperform ordinary IPOs led by other underwriters. Copyright (c) 2006 Financial Management Association International.

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Bibliographic Info

Article provided by Financial Management Association International in its journal Financial Management.

Volume (Year): 35 (2006)
Issue (Month): 1 (03)
Pages: 5-29

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Handle: RePEc:bla:finmgt:v:35:y:2006:i:1:p:5-29

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Cited by:
  1. Cécile Carpentier & Jean-Marc Suret, 2011. "The survival and success of Canadian penny stock IPOs," Small Business Economics, Springer, vol. 36(1), pages 101-121, January.
  2. Cécile Carpentier & Jean-Marc Suret, 2009. "The Survival and Success of Canadian Penny Stock IPOs," CIRANO Working Papers 2007s-28, CIRANO.
  3. Carpentier, Cécile & L'Her, Jean-François & Suret, Jean-Marc, 2010. "Stock exchange markets for new ventures," Journal of Business Venturing, Elsevier, vol. 25(4), pages 403-422, July.
  4. Hoa Nguyen & William Dimovski & Robert Brooks, 2010. "Underpricing, Risk Management, Hot Issue and Crowding out Effects: Evidence From the Australian Resources Sector Initial Public Offerings," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 13(03), pages 333-361.
  5. Cécile Carpentier & Jean-Marc Suret, 2009. "Investir dans des titres de petite capitalisation : le cas de la Bourse de croissance TSX," CIRANO Working Papers 2009s-07, CIRANO.
  6. Cécile Carpentier & Jean-François L'Her & Jean-Marc Suret, 2008. "Stock Exchange Markets for New Ventures," CIRANO Working Papers 2008s-12, CIRANO.
  7. Kenji Kutsuna & William Dimovski & Robert Brooks, 2008. "The Pricing and Underwriting Costs of Japanese REIT IPOs," Journal of Property Research, Taylor & Francis Journals, vol. 25(3), pages 221-239, November.
  8. James C. Brau & J. Troy Carpenter, 2012. "Efficacy of the 1992 Small Business Incentive Act," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 4(3), pages 204-217, August.
  9. Cécile Carpentier & Jean-Marc Suret, 2009. "The Canadian Public Venture Capital Market," CIRANO Working Papers 2009s-08, CIRANO.
  10. Dimovski, William & Brooks, Robert, 2008. "The underpricing of gold mining initial public offerings," Research in International Business and Finance, Elsevier, vol. 22(1), pages 1-16, January.
  11. Rhee, S. Ghon & Wu, Feng, 2012. "Anything wrong with breaking a buck? An empirical evaluation of NASDAQ's $1 minimum bid price maintenance criterion," Journal of Financial Markets, Elsevier, vol. 15(2), pages 258-285.
  12. Daniel Konku & Vivek Bhargava, 2012. "IPO underpricing and their determinants: penny stocks versus non-penny stocks," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 3(1), pages 69-88.

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