Optimal Initial Public O¤ering design with aftermarket trading
We characterize the optimal pricing and allocation of shares in the presence of distinct adverse selection problems. Some investors have private information at the time of the IPO and sell their shares in the after-market upon facing liquidity needs. Others learn their private interest in the after-market, and sell their shares strategically. The optimal mechanism trades-o¤ informational rents and rents to strategic traders. Flipping facilitates truthful information revelation. When liquidity needs are likely, it is optimal to allocate all shares to investors informed at the IPO stage. Otherwise, some shares are allocated to those who trade strategically in the after-market.
|Date of creation:||2009|
|Contact details of provider:|| Postal: Maynooth, Co. Kildare|
Web page: http://www.maynoothuniversity.ie/economics-finance-and-accounting
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- Andrew Ellul & Marco Pagano, 2006.
"IPO Underpricing and After-Market Liquidity,"
Review of Financial Studies,
Society for Financial Studies, vol. 19(2), pages 381-421.
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- Moez Bennouri & Sonia Falconieri, 2006. "Optimal auctions with asymmetrically informed bidders," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(3), pages 585-602, 08.
- Ellis, Katrina, 2006. "Who trades IPOs? A close look at the first days of trading," Journal of Financial Economics, Elsevier, vol. 79(2), pages 339-363, February.
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- Boehmer, Beatrice & Boehmer, Ekkehart & Fishe, Raymond P. H., 2006. "Do Institutions Receive Favorable Allocations in IPOs with Better Long-Run Returns?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(04), pages 809-828, December. Full references (including those not matched with items on IDEAS)
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