IPO Quantity Revisions

38 Pages Posted: 21 Aug 2015

See all articles by Wei Wang

Wei Wang

Cleveland State University

Chris Yung

University of Virginia - McIntire School of Commerce

Date Written: May 30, 2015


During IPO bookbuilding, issuers revise both the offer price and the number of shares (or equivalently, insider retention). These two percentage revisions are of comparable magnitude and are nearly uncorrelated. We show theoretically that revision to offer price and to retention capture information differently: offer prices increase with good news of any kind, whereas retention rises with good news about assets-in-place but declines with good news about growth options. Consistent with the model, retention is positively associated with the return of the Fama-French value portfolio and negatively with that of the growth portfolio during the bookbuilding period. Post-IPO abnormal capital expenditures are positively associated with price revision when retention revision is downward, but not when it is upward. These findings indicate that price and retention revisions can disentangle the nature of information received during the IPO process.

Keywords: IPO, price revision, share revision, retention revision, information aggregation, assets-in-place, growth options, capital expenditures

JEL Classification: G30, G31, G32

Suggested Citation

Wang, Wei and Yung, Chris, IPO Quantity Revisions (May 30, 2015). 28th Australasian Finance and Banking Conference. Available at SSRN: https://ssrn.com/abstract=2648545 or http://dx.doi.org/10.2139/ssrn.2648545

Wei Wang (Contact Author)

Cleveland State University ( email )

Cleveland, OH 44115
United States

Chris Yung

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-242-0836 (Phone)

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