Does the Market Incorporate Previous IPO Withdrawals When Pricing Second-Time IPOs?

Financial Management, August 2009, vol. 38.

39 Pages Posted: 24 Apr 2009 Last revised: 1 Aug 2017

See all articles by Qin Lian

Qin Lian

Portland State University

Qiming Wang

Willamette University - Atkinson Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: January 19, 2009

Abstract

This paper examines the initial public offering (IPO) valuations of issuers that return to the IPO market successfully after withdrawing their first IPO attempt. We find that these second-time IPOs sell at a significant discount relative to similar contemporaneous IPOs that succeed in their first attempt. We also demonstrate that switching underwriters on the second IPO attempt reduces, but does not eliminate, the discount for second-time IPOs. When compared to their matched first-time IPOs, second-time IPOs have similar price revisions and post-IPO long-run stock and operating performances. Overall, these results suggest that the negative information conveyed by the withdrawal event is incorporated into the lower offer valuations for second-time IPOs. Switching investment banks can mitigate, but not eliminate, the perceived higher risk of the second-time offerings.

Keywords: IPO Withdrawal, Second-time IPOs, First-time IPOs, Valuation Discount

JEL Classification: G14, G34, G39

Suggested Citation

Lian, Qin and Wang, Qiming, Does the Market Incorporate Previous IPO Withdrawals When Pricing Second-Time IPOs? (January 19, 2009). Financial Management, August 2009, vol. 38., Available at SSRN: https://ssrn.com/abstract=1330176

Qin Lian

Portland State University ( email )

United States
5037253728 (Phone)

Qiming Wang (Contact Author)

Willamette University - Atkinson Graduate School of Management ( email )

900 State Street
Salem, OR 97301
United States

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