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Does the Market Incorporate Previous IPO Withdrawals When Pricing Second-Time IPOs?

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  • Qin Lian
  • Qiming Wang
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    Abstract

    "This paper examines the initial public offering (IPO) valuations of issuers that return to the IPO market successfully after withdrawing their first IPO attempt. We find that these second-time IPOs sell at a significant discount relative to similar contemporaneous IPOs that succeed in their first attempt. We also demonstrate that switching underwriters on the second IPO attempt reduces, but does not eliminate, the discount for second-time IPOs. When compared to their matched first-time IPOs, second-time IPOs have similar price revisions and post-IPO long-run stock and operating performances. Overall, these results suggest that the negative information conveyed by the withdrawal event is incorporated into the lower offer valuations for second-time IPOs. Switching investment banks can mitigate, but not eliminate, the perceived higher risk of the second-time offerings." Copyright (c) 2009 Financial Management Association International.

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    Bibliographic Info

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

    Volume (Year): 38 (2009)
    Issue (Month): 2 (06)
    Pages: 357-380

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    Handle: RePEc:bla:finmgt:v:38:y:2009:i:2:p:357-380

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    Cited by:
    1. Hao, (Grace) Qing, 2011. "Securities litigation, withdrawal risk and initial public offerings," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 438-456, June.
    2. Lian, Qin & Wang, Qiming, 2012. "Acquisition valuations of withdrawn IPOs: When IPO plans turn into mergers," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1424-1436.

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