IPO Pricing, Block Sales, and Long-Term Performance

30 Pages Posted: 31 Aug 2007

See all articles by Kuntara Pukthuanthong

Kuntara Pukthuanthong

University of Missouri, Columbia

Nikhil P. Varaiya

San Diego State University

Abstract

Block sales following IPOs are related to the IPOs' value relative to an estimate of intrinsic value, opening-trade return, and IPO size. Overvalued IPOs experience more block sales than undervalued IPOs. IPOs with high block sales outperform IPOs with low block sales from 20 days after IPO through lockup expiration; however, IPOs with high block sales underperform IPOs with low block sales from lockup expiration through the third year after the IPO. The results indicate that block traders are advantaged relative to other traders; whether the advantage is based on superior information or superior valuation capabilities is unknown.

Suggested Citation

Pukthuanthong, Kuntara and Varaiya, Nikhil P., IPO Pricing, Block Sales, and Long-Term Performance. The Financial Review, Vol. 42, No. 3, pp. 319-348, August 2007, Available at SSRN: https://ssrn.com/abstract=1011277 or http://dx.doi.org/10.1111/j.1540-6288.2007.00174.x

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

Nikhil P. Varaiya

San Diego State University ( email )

San Diego, CA 92182-0763
United States

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