Allocation of initial public offerings and flipping activity

Aggarwal, Reena

doi:10.1016/s0304-405x(02)00250-7

Cited by 229 publications

(221 citation statements)

References 30 publications

Supporting

Mentioning

184

Contrasting

Unclassified

Order By: Relevance

“…Flipping by institutions accounts for 45 % of total dollar volume on the first day for cold IPOs and 22 % for hot IPOs. Aggarwal (2003), using a unique proprietary data set, finds that institutions are allocated more than 73 % of IPO shares, and conclude that institutions flip more often than retail investors, especially in hot IPOs. Aggarwal also documents that flipping accounts for 23 % of trading volume for cold IPOs and 17.5 % for hot IPOs.…”

Section: Decimalization and Flipping Activitymentioning

confidence: 99%

“…Since trading volume of cold IPOs is relatively lower than hot IPOs in aftermarket trading (Aggarwal (2003)), 24 for robustness, we compute a flipping ratio as the first-day sell-signed block-trade to the total number of shares offered for each of the three institutional trading proxies. The results (not reported but available upon request) show that institutional flipping based on shares offered for hot IPOs is still higher and significant at the 5 % level in the post-decimalization period.…”

Section: Flipping Activitymentioning

confidence: 99%

“…25 The mean values of shares traded as a proportion of total shares offered on the first trading day are 62.07 and 64.77 % in the pre-and post-decimalization periods, respectively. Aggarwal (2003) reports that the mean of the shares traded as a proportion of total shares offered in the first two days is 81.97 %. Thus, we eliminate outliers which are defined as shares traded on the first day that are more than 100 % of the total shares offered.…”

Section: Regression Analysismentioning

confidence: 99%

See 2 more Smart Citations

Decimalization, IPO aftermath, and liquidity

Charoenwong

Ding

Thong

2015

Rev Quant Finan Acc

View full text Add to dashboard Cite

We investigate the effect of decimalization on the aftermarket trading of NYSE-listed IPOs. We find that the relation between bid-ask spread and underpricing becomes negative post-decimalization, suggesting that benefits from the increased price competition accrue more to hot IPOs. The quoted depth is generally smaller post-decimalization due to a higher probability of front running, which aggravates the cost of adverse selection and limit order submission. We show that underwriters continue to provide price support but are only willing to cover the initial short position, if profitable to do so. Decimal pricing does not affect the flipping strategy of institutions for cold IPOs as they are likely bound by the underwriter's price support and their share allocation. Institutions, however, tend to flip more hot IPOs during the post-than in the pre-decimalization period, suggesting that the cost of flipping is lower for shares with a substantial price runup during aftermarket trading.

show abstract

Section: Decimalization and Flipping Activitymentioning

confidence: 99%

Section: Flipping Activitymentioning

confidence: 99%

Section: Regression Analysismentioning

confidence: 99%

See 1 more Smart Citation

Decimalization, IPO aftermath, and liquidity

Charoenwong

Ding

Thong

2015

Rev Quant Finan Acc

View full text Add to dashboard Cite

show abstract

“…So the total position of the underwriter in an OAA consists of a short position in a forward contract on the stock plus a call option or, alternatively, of a put option and some constant payment. It 1 The option is named after the first initial public offering (IPO) where such an over-allotment arrangement was implemented. This was in 1924 when Greenshoe Manufactoring Co. went public.…”

Section: Introductionmentioning

confidence: 99%

“…The issue of who receives the benefits from an OAA is tackled by Aggarwal (2003), who argues that price support can be beneficial by alleviating sales pressure generated by so-called flippers, i.e. investors who re-sell the stocks they obtained in the IPO after a very short holding period.…”

mentioning

confidence: 99%

Over-Allotment Options in IPOs on Germany's Neuer Markt - An Empirical Investigation

Franzke

Schlag

2003

SSRN Journal

View full text Add to dashboard Cite

Abstract:Over-allotment arrangements are nowadays part of almost any initial public offering. The underwriting banks borrow stocks from the previous shareholders to issue more than the initially announced number of shares. This is combined with the option to cover this short position at the issue price. We present empirical evidence on the value of these arrangements to the underwriters of initial public offerings on the Neuer Markt. The over-allotment arrangement is regarded as a portfolio of a long call option and a short position in a forward contract on the stock, which is different from other approaches presented in the literature.Given the economically substantial values for these option-like claims we try to identify benefits to previous shareholders or new investors when the company is using this instrument in the process of going public. Although we carefully control for potential endoge neity problems, we find virtually no evidence for a reduction in underpricing for firms using over-allotment arrangements. Furthermore, we do not find evidence for more pronounced price stabilization activities or better aftermarket performance for firms granting an over-allotment arrangement to the underwriting banks. EFM Classification: 230, 410Keywords: Over-Allotment Option, Flotation Costs, Underwriter Fee, Neuer Markt * Center for Financial Studies, Taunusanlage 6, 60329 Frankfurt am Main, Germany. Phone: +49-69-242 941 16, Fax: +49-69-242 941 77, Email: franzke@ifk -cfs.de ♣ Faculty of Economics and Business Administration, Goethe University, Mertonstr. 17, 60054 Frankfurt am Main, Germany. Phone: +49-69-798-22674, Fax: +49-69-798-22788, Email: schlag@wiwi.uni-frankfurt Introduction and MotivationSince the mid nineties book building has increasingly replaced the fixed-price method as the standard procedure for setting the issue price in initial public offerings (IPOs) in Germany. Along with this change the instrument of the over-allotment option (also called "greenshoe" option 1 ) has gained considerable importance. An over-allotment arrangement (OAA) typically works as follows. To be able to meet potentially higher demand for an issue, i.e. to be able to place more than the initially announced number of shares, the underwriter borrows additional shares (the greenshoe (GS)) 2 from the company going public. This borrowing of the shares comes with the obligation for the underwriter to return the shares within a fixed period of time, usually one month. In case of a bullish market the underwriter might thus be forced to buy back the shares at a higher price, thereby incurring a loss. An OAA, including a GS option, however, allows the underwriting bank to buy the shares from the issuing firm at the issue price, and this agreement protects the underwriter against unfavorable price movements in the secondary market. On the other hand, a trading profit for the underwriting bank could arise if the stock trades below the issuing price sometime during the life of the OAA, since the underwriter could then buy the sha...

show abstract

Freshen up before going public: Do environmental, social, and governance factors affect firms' appearance during the initial public offering?

Harasheh

2022

Bus Strat Env

View full text Add to dashboard Cite

Going public (or initial public offering IPO) is a corporate strategic decision for value enhancement. Underpricing is a phenomenon related to going public and has been studied from a purely financial perspective. In this paper, we investigate whether underpricing incorporates sustainability performance pre-IPO by establishing an original linkage between underpricing and ESG factors before the firm's listing on stock markets. Using informational asymmetries and quality signaling frameworks, we track the journey of going public by Italian Small Medium Enterprises (SMEs) from 2009 to 2017 and show how sustainability issues are incorporated into the IPO underpricing.We demonstrate that underpricing is strongly related to financial and sustainability variables only in the year just before the IPO, indicating better informational efficiency, quality signaling, and image-improving practice. The post-IPO stock return is less correlated with the firm's financial and ESG variables, suggesting that markets can incorporate such information into stock returns in the long run. This paper provides novel insights by delivering an original linkage between a firm's public listing attributes and sustainability performance, offering a temporal tracking of the SMEs before and after the IPO, emphasizing the role of sustainability in the IPO process.

show abstract

Allocation of initial public offerings and flipping activity

Cited by 229 publications

References 30 publications

Decimalization, IPO aftermath, and liquidity

Decimalization, IPO aftermath, and liquidity

Over-Allotment Options in IPOs on Germany's Neuer Markt - An Empirical Investigation

Freshen up before going public: Do environmental, social, and governance factors affect firms' appearance during the initial public offering?

Contact Info

Product

Resources

About