As a Matter of Interest - Whose Money is it Anyway?
26 Pages Posted: 19 Sep 2006
Abstract
Tianjin Port Development Holdings Limited set a world record when the retail portion of its initial public offering in Hong Kong was oversubscribed by a massive 1,703 times. This unprecedented heavy demand is estimated to have earned the company about HK$95.3 million, or some US$12.3 million, in interest income simply by placing the application moneys in overnight money market accounts as it prepares to allot the shares to the subscribers.
The confluence of highly favourable conditions namely, rising interest rates coupled with the euphoria over the listing of Mainland Chinese companies is conservatively estimated to result in HK$1.2 billion, or almost US$155 million, in gross interest income accruing to the companies that list on the Stock Exchange of Hong Kong during 2006. Using data from the 17 initial public offerings in Hong Kong for the five months to 31 May 2006, this paper highlights some shortcomings of the existing system and puts forth recommendations for their rectification which principal objective is a more equitable application of this 'windfall'.
Keywords: Initial Public Offerings, Interest Income, Corporate Governance
JEL Classification: G34, G38, K22
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
Why Has IPO Underpricing Changed Over Time?
By Tim Loughran and Jay R. Ritter
-
A Review of IPO Activity, Pricing and Allocations
By Jay R. Ritter and Ivo Welch
-
A Review of IPO Activity, Pricing, and Allocations
By Ivo Welch and Jay R. Ritter
-
Why Don't Issuers Get Upset About Leaving Money on the Table in Ipos?
By Tim Loughran and Jay R. Ritter
-
Underpricing and Entrepreneurial Wealth Losses in Ipos: Theory and Evidence
-
Common Stock Offerings Across the Business Cycle: Theory and Evidence
By Hyuk Choe, Ronald W. Masulis, ...
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert
-
IPO Market Cycles: Bubbles or Sequential Learning?
By Michelle Lowry and G. William Schwert