AbstractCompetition between investment banks for lead underwriter mandates in IPOs is fierce, but having committed to a particular bank, the power of the issuer is greatly reduced. Although information revelation theories justify giving the underwriters influence over pricing and allocation, this creates the potential for conflicts of interest. In this clinical paper we analyse an interesting innovation that has been used in recent European IPOs whereby issuers separate the preparation and distribution roles of investment banks, and keep competitive pressure on the banks throughout the issue process. These â€˜competitive IPOsâ€™ allow the issuer greater control and facilitate more contingent fee structures that help to mitigate against â€˜bait and switch.â€™ But unlike more radical departures from traditional bookbuilding â€“ such as auctions â€“ the competitive IPO is an incremental market-based response to potential conflicts of interest that retains many of the advantages of investment banksâ€™ active involvement in issues.
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Bibliographic InfoPaper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2009fe01.
Date of creation: 2009
Date of revision:
IPO; bookrunners; syndicates; underpricing;
Other versions of this item:
- G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-22 (All new papers)
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