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IPO Pricing with Bookbuilding and a When-Issued Market

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Author Info

  • Alex Stomper

    (Department of Business Studies, University of Vienna)

  • Wolfgang Aussenegg

    (Department of Finance, Vienna University of Technology)

  • Pegaret Pichler

    (Department of Finance and Economics, Sloan School of Management Massachusetts Institute of Technology)

Abstract

This paper examines the German IPO pricing process which combines bookbuilding with a liquid pre-IPO when-issued market. We find no partial adjustment phenomenon, as has been documented for U.S. IPOs. We thus find no evidence that bookbuilding provides information for IPO pricing, beyond the information that is required to set preliminary price ranges. Once price ranges are set, when-issued trading commences and indicates how IPOs should be priced in the primary market. However, the evidence suggests that such trading does not fully supplant information gathering through bookbuilding.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2004.8.

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Date of creation: Jan 2004
Date of revision:
Handle: RePEc:fem:femwpa:2004.8

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Keywords: Initial public offerings; Bookbuilding; When-issued trading;

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References

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  1. Benveniste, Lawrence M. & Busaba, Walid Y. & Wilhelm, William Jr., 2002. "Information Externalities and the Role of Underwriters in Primary Equity Markets," Journal of Financial Intermediation, Elsevier, vol. 11(1), pages 61-86, January.
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  3. Tim Jenkinson & Howard Jones, 2004. "Bids and Allocations in European IPO Bookbuilding," Journal of Finance, American Finance Association, vol. 59(5), pages 2309-2338, October.
  4. Ljungqvist, Alexander P & Wilhelm Jr, William J, 2001. "IPO Allocations: Discriminatory or Discretionary?," CEPR Discussion Papers 2855, C.E.P.R. Discussion Papers.
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  7. Loffler, Gunter & Panther, Patrick F. & Theissen, Erik, 2005. "Who knows what when? The information content of pre-IPO market prices," Journal of Financial Intermediation, Elsevier, vol. 14(4), pages 466-484, October.
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  16. repec:kap:eurfin:v:10:y:2006:i:3:p:353-387 is not listed on IDEAS
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Citations

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Cited by:
  1. Ravi Jagannathan & Ann E. Sherman, 2006. "Why Do IPO Auctions Fail?," NBER Working Papers 12151, National Bureau of Economic Research, Inc.
  2. Gajewski, Jean-Fran├žois & Gresse, Carole, 2006. "A Survey of the European IPO Market," ECMI Papers 1207, Centre for European Policy Studies.
  3. Elston, Julie Ann & Yang, J. Jimmy, 2010. "Venture capital, ownership structure, accounting standards and IPO underpricing: Evidence from Germany," Journal of Economics and Business, Elsevier, vol. 62(6), pages 517-536, November.
  4. Bennouri, Moez & Gimpel, Henner & Robert, Jacques, 2011. "Measuring the impact of information aggregation mechanisms: An experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 78(3), pages 302-318, May.
  5. Gresse, Carole & Gajewski, Jean-Fran├žois, 2006. "A Survey of the European IPO Market," Economics Papers from University Paris Dauphine 123456789/8670, Paris Dauphine University.
  6. Benveniste, Lawrence M. & Fu, Huijing & Seguin, Paul J. & Yu, Xiaoyun, 2008. "On the anticipation of IPO underpricing: Evidence from equity carve-outs," Journal of Corporate Finance, Elsevier, vol. 14(5), pages 614-629, December.
  7. Renneboog, L.D.R. & Spaenjers, C., 2008. "The Dutch Grey Market," Discussion Paper 2008-035, Tilburg University, Tilburg Law and Economic Center.
  8. Alex Stomper & Pegaret Pichler, 2004. "Primary Market Design: Direct Mechanisms and Markets," Working Papers 2004.9, Fondazione Eni Enrico Mattei.
  9. Cook, Douglas O. & Kieschnick, Robert & McCullough, B.D., 2008. "Regression analysis of proportions in finance with self selection," Journal of Empirical Finance, Elsevier, vol. 15(5), pages 860-867, December.
  10. Edwards, Amy K. & Hanley, Kathleen Weiss, 2010. "Short selling in initial public offerings," Journal of Financial Economics, Elsevier, vol. 98(1), pages 21-39, October.

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