What All-Cash Companies Tell Us About IPOs and Acquisitions

Abstract

We examine the IPOs of and acquisitions made by all-cash firms. This unique sample of firms provides a perspective unencumbered by much of the confounding information typically surrounding these corporate events. We find IPO gross spreads of 7% -- similar to the spreads in more complex IPO firms, and thus consistent with illogically sticky spreads. We find acquirer announcement returns roughly triple that of typical acquisitions. Since these returns reflect primarily the valuation split between acquirer and target, they suggest that some reduction in value of typical acquisitions stems from overestimating synergies or the revelation of new information regarding the bidder.

Keywords: IPOs, Acquisitions, SPACs

JEL Classification: G24, G34