Initial Public Offering Allocations, Price Support, and Secondary Investors
Sturla Lyngnes Fjesme
University of Melbourne - Department of Finance; Financial Research Network (FIRN)
March 1, 2015
AFA 2012 Chicago Meetings Paper
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
Tying Initial Public Offering (IPO) allocations to after-listing purchases of other IPO shares, as a form of price support, has generated much theoretical interest and media attention. Price support is price manipulation and can reduce secondary investor return. Obtaining data to investigate price support has in the past proven to be difficult. We document that price support is harming secondary investors using new data from the Oslo Stock Exchange (OSE). We also show that investors who engage in price support are allocated more future oversubscribed allocations and that secondary investors stay away from the market in the future when they lose money.
Number of Pages in PDF File: 49
Keywords: IPO allocations; Laddering; Price stabilization; Price support; Equity offerings
JEL Classification: G24; G28
Date posted: March 16, 2011 ; Last revised: November 16, 2015
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