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What All-Cash Companies Tell Us About IPOs and Acquisitions

31 Pages Posted: 12 Jul 2012 Last revised: 4 Oct 2015

Usha Rodrigues

University of Georgia School of Law

Mike Stegemoller

Baylor University

Date Written: July 25, 2012

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

Suggested Citation

Rodrigues, Usha and Stegemoller, Mike, What All-Cash Companies Tell Us About IPOs and Acquisitions (July 25, 2012). Available at SSRN: https://ssrn.com/abstract=2101830 or http://dx.doi.org/10.2139/ssrn.2101830

Usha Rodrigues

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States
706-242-5562 (Phone)

Michael Stegemoller (Contact Author)

Baylor University ( email )

P.O. Box 98004
Waco, TX 76798-8004
United States
254-710-4145 (Phone)

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