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Short covering and price stabilization of IPOs

  • Andrea Signori
  • Michele Meoli

    ()

  • Silvio Vismara
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    The price stabilization service consists of purchasing shares in the aftermarket in order to prevent price drops, and it is not mandatory. Using a sample of Italian IPOs, we find that only half of the IPOs that require this service are actually stabilized after going public and that price support is substantial for poorly performing IPOs. Nevertheless, the fees charged are not informative about the provision of this ancillary activity. Rather, the underwriter’s reputation is negatively associated to the stabilization activity. Negative price revisions and negative (or low) underpricing, also drive the provision of these services.

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    File URL: http://hdl.handle.net/10446/27079
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    Paper provided by Department of Economics and Technology Management, University of Bergamo in its series Working Papers with number 1204.

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    Date of creation: 2012
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    Handle: RePEc:brh:wpaper:1204
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