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The strategic reallocation of IPO shares

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  • Bertoni, Fabio
  • Giudici, Giancarlo

Abstract

In this work, we study the reallocation of shares to retail and institutional investors, measured as the difference between the allocation declared before the initial public offering (IPO) and the effective allotment decided by the underwriter after the bookbuilding process. The reallocation is disaggregated into three components, two of which are under the direct control of the underwriter: the initial allocation, and the demand satisfaction ratio. The empirical analysis is based on a sample of 193 hybrid IPOs issued in Italy between 1997 and 2012. Controlling for firm and IPO characteristics, we find that the IPO shares are typically shifted toward institutional investors when positive information is collected during the bookbuilding process. The IPO pricing and share reallocation are found to be interdependent, and reallocation is used in combination with partial adjustment to reward institutional investors.

Suggested Citation

  • Bertoni, Fabio & Giudici, Giancarlo, 2014. "The strategic reallocation of IPO shares," Journal of Banking & Finance, Elsevier, vol. 39(C), pages 211-222.
  • Handle: RePEc:eee:jbfina:v:39:y:2014:i:c:p:211-222
    DOI: 10.1016/j.jbankfin.2013.11.020
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    References listed on IDEAS

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    Cited by:

    1. Fabio Bertoni & Matteo Bonaventura & Giancarlo Giudici, 2013. "The allotment of IPO shares: placing strategies between retail versus institutional investors," Chapters,in: Handbook of Research on IPOs, chapter 10, pages 207-218 Edward Elgar Publishing.
    2. repec:eee:jebusi:v:95:y:2018:i:c:p:59-74 is not listed on IDEAS

    More about this item

    Keywords

    Initial public offerings; Bookbuilding; Share allocation;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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