The Missed Opportunity of IPOs by Tender: A Case Study in British Capital Market Failure
Allegations of British capital market failure are numerous, range from claims of domestic investor bias before 1914 to charges of short-termism against institutional investors towards the end of the last century, and are frequently contentious. This paper revisits this literature by pointing up the post-1945 IPO market as a clear example of capital market failure. Despite the tender offer method delivering 10% lower underpricing than the dominant IPO method, it was adopted by fewer than 1 in 10 firms going public. This missed opportunity cost issuing firms £1.4 billion in "money left on the table" between 1960 and 1986 at 2004 prices and can be attributed to a lack of competition among issuing houses and brokers pre-Big Bang.
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