Are IPO Auctions Celebrating a Comeback: U.S. Evidence

Venture Capital Journal, Vol. 9, No. 4, pp. 1-36, 2007

Posted: 13 Jan 2009

See all articles by Kuntara Pukthuanthong

Kuntara Pukthuanthong

University of Missouri, Columbia

Nikhil P. Varaiya

San Diego State University

Thomas John Walker

Concordia University, Quebec - Department of Finance

Date Written: January 13, 2009

Abstract

This study documents differences between two widely known IPO selling methods: the auction method and bookbuilding method for a sample of US IPOs. We employ a matched firm technique to compare the two IPO selling methods and empirically test hypotheses relating to the two selling methods. Our sample comprises all auction IPOs in the US between January 1999 and December 2004. Our results indicate that in comparison to matched bookbuilding IPOs, auction IPOs are less underpriced and thus leave less money on the table for the issuers, and have lower underwriter spreads. Relative to auction IPOs, bookbuilding IPOs are more likely to be followed and positively recommended by analysts and they receive more coverage by lead analysts, i.e. analysts affiliated with lead underwriters. Moreover, bookbuilding IPOs tend to outperform auction IPOs up to 18 months post-IPO, exhibit lower aftermarket volatility, and insiders of auction IPOs agree to lock up a higher fraction of their shares and hold them for a longer period of time.

Keywords: Initial public offerings, IPO auctions

JEL Classification: G1

Suggested Citation

Pukthuanthong, Kuntara and Varaiya, Nikhil P. and Walker, Thomas John, Are IPO Auctions Celebrating a Comeback: U.S. Evidence (January 13, 2009). Venture Capital Journal, Vol. 9, No. 4, pp. 1-36, 2007, Available at SSRN: https://ssrn.com/abstract=1326785

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

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

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