Strategic Waiting in the IPO Markets

Abstract

The paper analyzes the strategic waiting tendencies of IPO firms. Our model shows why some high-quality firms may strategically delay their initial public offering until a favorable signal about the economic conditions is generated by other issuing firms. Survival analysis suggests that IPOs in the highest quality decile have significantly higher median waiting days (since the start of a rising IPO cycle) than the IPOs in the lowest decile. During the early stages of an expanding IPO cycle the average firm quality is lower than in its later stages. We find supporting evidence also from the IPOs of future S&P500 firms.

Keywords: IPO Clustering, IPO Cycles, Social Learning, Strategic Waiting, Survival Analysis

JEL Classification: C41, C72, D82, D83, G20, E32