English, Article, Journal or magazine article edition: IPO Underpricing During the Boom: A Block-Booking Explanation Kevin James

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Bookmark: http://trove.nla.gov.au/version/45192
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  • preprint
Language
  • English

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Title
  • IPO Underpricing During the Boom: A Block-Booking Explanation
Author
  • Kevin James
Physical Description
  • preprint
Notes
  • A bank can efficiently underwrite individually difficult to value IPOs by offering them as a package deal to a stable coalition of investors (block-booking). Block-booking banks set offer prices to equalize down side risk across their offerings, not expected returns. Examining US IPOs over the 1986 to 2003 period, I find that this is so. Given the return distribution on non ­tech IPOs during non-boom years, equalizing downside risk implies that the average initial return on tech/​boom IPOs equals 48% (actual value: 46%). The block-booking theory accounts for both the direction and magnitude of differences in average initial returns across IPO types.Kevin James is a Visiting Fellow at the Financial Markets Group, London School of Economics  
  • RePEc:fmg:fmgdps:dp481
Language
  • English
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