An Attempt to Improve Fairness, Efficiency, and Access in the Financial Markets: The W.R. Hambrecht and Co Open IPO Process

Abstract:     
This paper is an exploratory case study of the WR Hambrecht Co and their experience in attempting to reorient the IPO market roles and practices to improve access, efficiency, and fairness. WRH Co's OpenIPO process attempts to minimize “underpricing” in the IPO event, which is referred to as “leaving money on the table” from the issuing company’s perspective. While the original concept was a boutique investment bank, the success of the Google and Morningstar IPO events has implications for large scale IPO transactions. In addition to secondary data analysis, interviews were conducted with industry professionals and WRH staff. This paper also discusses auction methods. Since this paper was written, there have been major upheavals in the financial markets so some of the companies mentioned (Lehman Bros., Bear Stearns, etc.) are not in the same form as they were in 2006 when the research was done. Still, the author hopes that some of the data and stories offered here will give insight into one aspect of the financial markets.

Number of Pages in PDF File: 39

Keywords: IPO events, risk, fairness, efficiency, institutional entrepreneurs, financing, SEC rules, Google, Morningstar

JEL Classification: E44, G1, G24, K22, M13, M31, N8, O31

working papers series