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Initial Public Offering Allocations, Price Support, and Secondary Investors

49 Pages Posted: 16 Mar 2011 Last revised: 16 Nov 2015

Sturla Lyngnes Fjesme

Oslo and Akershus University; University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Date Written: March 1, 2015


Tying Initial Public Offering (IPO) allocations to after-listing purchases of other IPO shares, as a form of price support, has generated much theoretical interest and media attention. Price support is price manipulation and can reduce secondary investor return. Obtaining data to investigate price support has in the past proven to be difficult. We document that price support is harming secondary investors using new data from the Oslo Stock Exchange (OSE). We also show that investors who engage in price support are allocated more future oversubscribed allocations and that secondary investors stay away from the market in the future when they lose money.

Keywords: IPO allocations; Laddering; Price stabilization; Price support; Equity offerings

JEL Classification: G24; G28

Suggested Citation

Fjesme, Sturla Lyngnes, Initial Public Offering Allocations, Price Support, and Secondary Investors (March 1, 2015). AFA 2012 Chicago Meetings Paper; Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: or

Sturla Lyngnes Fjesme (Contact Author)

Oslo and Akershus University ( email )

P.O. Box 4 St Olavs plass
Oslo, NO-0130

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane


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