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Second time lucky? Withdrawn IPOs that return to the market

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  • Dunbar, Craig G.
  • Foerster, Stephen R.
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    Abstract

    We investigate issuers withdrawing an IPO (after security regulation filings) that return later for a successful offering. Venture capital backing and reputation of the lead underwriter are key factors in predicting successful return. The possibility of returning has a significant impact on the decision to withdraw and the pricing of offerings that succeed. Our sample of returning IPOs also provides a unique setting to investigate underwriter switching after a withdrawal but before a successful IPO. We find that switching occurs in response to poor bank performance and when switching firms "graduate" to banks that have high industry market shares.

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    File URL: http://www.sciencedirect.com/science/article/B6VBX-4PG11CM-2/1/6b8af2b9be467523f59433b0e95ea630
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 87 (2008)
    Issue (Month): 3 (March)
    Pages: 610-635

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    Handle: RePEc:eee:jfinec:v:87:y:2008:i:3:p:610-635

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    Web page: http://www.elsevier.com/locate/inca/505576

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    References

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    1. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
    2. Bradley, Daniel J. & Jordan, Bradford D., 2002. "Partial Adjustment to Public Information and IPO Underpricing," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(04), pages 595-616, December.
    3. Carter, Richard B & Manaster, Steven, 1990. " Initial Public Offerings and Underwriter Reputation," Journal of Finance, American Finance Association, vol. 45(4), pages 1045-67, September.
    4. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
    5. Barry, Christopher B. & Muscarella, Chris J. & Peavy, John III & Vetsuypens, Michael R., 1990. "The role of venture capital in the creation of public companies*1: Evidence from the going-public process," Journal of Financial Economics, Elsevier, vol. 27(2), pages 447-471, October.
    6. Dunbar, Craig G., 1998. "The Choice between Firm-Commitment and Best-Efforts Offering Methods in IPOs: The Effect of Unsuccessful Offers," Journal of Financial Intermediation, Elsevier, vol. 7(1), pages 60-90, January.
    7. Benveniste, Lawrence M. & Spindt, Paul A., 1989. "How investment bankers determine the offer price and allocation of new issues," Journal of Financial Economics, Elsevier, vol. 24(2), pages 343-361.
    8. Mark Grinblatt & Chuan Yang Hwang, . "Signalling and the Pricing of Unseasoned New Issues," Rodney L. White Center for Financial Research Working Papers 01-89, Wharton School Rodney L. White Center for Financial Research.
    9. Lawrence M. Benveniste & Alexander Ljungqvist & William J. Wilhelm & Xiaoyun Yu, 2003. "Evidence of Information Spillovers in the Production of Investment Banking Services," Journal of Finance, American Finance Association, vol. 58(2), pages 577-608, 04.
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    15. Clarke, Jonathan & Dunbar, Craig & Kahle, Kathleen M., 2001. "Long-Run Performance and Insider Trading in Completed and Canceled Seasoned Equity Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 415-430, December.
    16. Mikkelson, Wayne H. & Partch, M. Megan, 1988. "Withdrawn Security Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(02), pages 119-133, June.
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    18. Lowry, Michelle & Schwert, G. William, 2004. "Is the IPO pricing process efficient?," Journal of Financial Economics, Elsevier, vol. 71(1), pages 3-26, January.
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    Cited by:
    1. Cooney, John W. & Moeller, Thomas & Stegemoller, Mike, 2009. "The underpricing of private targets," Journal of Financial Economics, Elsevier, vol. 93(1), pages 51-66, July.
    2. Arikan, Asli M. & Stulz, Rene M., 2011. "Corporate Acquisitions, Diversification, and the Firm's Lifecycle," Working Paper Series 2011-18, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    3. Mantecon, Tomas & Poon, Percy, 2009. "An analysis of the liquidity benefits provided by secondary markets," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 335-346, February.
    4. François DEGEORGE & François DERRIEN & Kent L. WOMACK, . "Auctioned IPOs: The U.S. Evidence," Swiss Finance Institute Research Paper Series 08-38, Swiss Finance Institute.
    5. Jeon, Jin Q. & Ligon, James A., 2011. "The role of co-managers in reducing flotation costs: Evidence from seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1041-1056, May.
    6. Bernstein, Shai, 2012. "Does Going Public Affect Innovation?," Research Papers 2126, Stanford University, Graduate School of Business.
    7. Hao, (Grace) Qing, 2011. "Securities litigation, withdrawal risk and initial public offerings," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 438-456, June.
    8. Asli M. Arikan & René M. Stulz, 2011. "Corporate Acquisitions, Diversification, and the Firm’s Lifecycle," NBER Working Papers 17463, National Bureau of Economic Research, Inc.

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