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Auctioned IPOs: the U.S. Evidence

Listed author(s):
  • François Derrien

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • François Degeorge

Between 1999 and 2007, WR Hambrecht has completed 19 IPOs in the U.S. using an auction mechanism. We analyze investor behavior and mechanism performance in these auctioned IPOs using detailed bidding data. The existence of some bids posted at high prices suggests that some investors (mostly retail) try to free-ride on the mechanism. But institutional demand in these auctions is very elastic, suggesting that institutional investors reveal information in the bidding process. Investor participation is largely predictable based on deal size, and demand is dominated by institutions. Flipping is equally prevalent in auctions as in bookbuilt deals – but unlike in bookbuilding, investors in auctions tend to flip their shares more in cold deals. Finally, we find that institutional investors, who provide more information, are rewarded by obtaining a larger share of the deals that have higher initial returns. Our results therefore suggest that auctioned IPOs could be an effective alternative to traditional bookbuilding.

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Paper provided by HAL in its series Post-Print with number hal-00495575.

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Date of creation: 2009
Publication status: Published in Conference on Asia-Pacific Financial Markets, 2009, Séoul, South Korea
Handle: RePEc:hal:journl:hal-00495575
Note: View the original document on HAL open archive server: https://hal-hec.archives-ouvertes.fr/hal-00495575
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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