Abstract

http://ssrn.com/abstract=523342
 
 

References (24)



 
 

Citations (9)



 


 



Structuring the Initial Offering: Who to Sell to and How to Do it


Vojislav Maksimovic


University of Maryland - Robert H. Smith School of Business

Pegaret Pichler


Northeastern University, D’Amore-McKim School of Business, Finance Area

March 2004



Abstract:     
This paper shows how the owner of a nonpublic firm, who wishes to maximize revenue from the sale of shares, should structure the sale. We develop a unified model of adverse selection in the retail market and mechanism design for information gathering that enables us to determine the optimal amount of information gathering before setting the issue price. We show that the need to induce truthtelling does not, without allocation restrictions, lead to underpricing when bookbuilding is conducted prior to an initial public offering. We obtain a number of new empirical predictions relating the information gathering decision and underpricing to characteristics of the bookbuilding process and issue characteristics such as issue size and uncertainty about share value.

Number of Pages in PDF File: 44

Keywords: Mechanism design, IPOs

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Date posted: April 7, 2004  

Suggested Citation

Maksimovic, Vojislav and Pichler, Pegaret, Structuring the Initial Offering: Who to Sell to and How to Do it (March 2004). Available at SSRN: http://ssrn.com/abstract=523342 or http://dx.doi.org/10.2139/ssrn.523342

Contact Information

Vojislav Maksimovic
University of Maryland - Robert H. Smith School of Business ( email )
Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)
HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/
Pegaret Pichler (Contact Author)
Northeastern University, D’Amore-McKim School of Business, Finance Area ( email )
Boston, MA 02115
United States
HOME PAGE: http://www.northeastern.edu/pegaretpichler

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References:  24
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