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

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  • Qin Lian
  • Qiming Wang

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.

Suggested Citation

  • Qin Lian & Qiming Wang, 2009. "Does the Market Incorporate Previous IPO Withdrawals When Pricing Second-Time IPOs?," Financial Management, Financial Management Association International, vol. 38(2), pages 357-380, June.
  • Handle: RePEc:bla:finmgt:v:38:y:2009:i:2:p:357-380
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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1755-053X.2009.01039.x
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    Cited by:

    1. 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 "Acquisition valuations of withdrawn IPOs: When IPO plans turn into mergers," Journal of Banking & Finance, Elsevier, vol. 36(5), pages 1424-1436.
    2. Dambra, Michael & Field, Laura Casares & Gustafson, Matthew T., 2015. "The JOBS Act and IPO volume: Evidence that disclosure costs affect the IPO decision," Journal of Financial Economics, Elsevier, vol. 116(1), pages 121-143.
    3. Hao, (Grace) Qing, 2011. "Securities litigation, withdrawal risk and initial public offerings," Journal of Corporate Finance, Elsevier, vol. 17(3), pages 438-456, June.
    4. repec:eee:quaeco:v:66:y:2017:i:c:p:259-264 is not listed on IDEAS

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