Initial Public Offering Allocations, Price Support, and Secondary Investors
Sturla Lyngnes Fjesme
University of Melbourne - Department of Finance; Financial Research Network (FIRN)
December 1, 2014
AFA 2012 Chicago Meetings Paper
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 investor return using new data from the Oslo Stock Exchange. We also show that investors who engage in price support are allocated more future oversubscribed allocations while harmed secondary investors significantly reduce their future participation in the secondary market.
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: December 1, 2014
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