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IPO Pricing in the Dot-com Bubble

Author

Listed:
  • William J. Wilhelm
  • Alexander Ljungqvist

Abstract

IPO initial returns reached astronomical levels during 1999-2000. We show that the regime shift in initial returns and other elements of pricing behavior can be at least partially accounted for by a variety of marked changes in pre-IPO ownership structure and insider selling behavior over the period, which reduced key decision-makers' incentives to control underpricing. After controlling for these changes, the difference in underpricing between 1999-2000 and the preceding three years is much reduced. Our results suggest that it was firm characteristics that were unique during the "dot-com bubble" and that pricing behavior followed from incentives created by these characteristics.

Suggested Citation

  • William J. Wilhelm & Alexander Ljungqvist, 2002. "IPO Pricing in the Dot-com Bubble," OFRC Working Papers Series 2002fe07, Oxford Financial Research Centre.
    • Handle: RePEc:sbs:wpsefe:2002fe07
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    File URL: http://www.finance.ox.ac.uk/file_links/finecon_papers/2002fe07.pdf
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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • 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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