IPO Pricing in the Dot-Com Bubble
40 Pages Posted: 3 Nov 2008
Date Written: February 2002
IPO initial returns reached astronomical levels during 1999-2000. We show that the regime shift in initial returns and other elements of pricing behavior can be at least partially accounted for by a variety of marked changes in pre-IPO ownership structure and insider selling behavior over theperiod which reduced key decision-makersâ¬" incentives to control underpricing. After controlling for these changes, there appears to be little special about the 1999-2000 period, aside from the preponderance of internet and high-tech firms going public. Our results suggest that it was firmcharacteristics that were unique during the â¬Sdot-com bubbleâ¬? and that pricing behavior followed from incentives created by these characteristics.
Keywords: Initial public offerings, Underpricing; Intermediation, Internet, Hot issue markets
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