IPO Spillover Effects in a New and Uncertain Sector: The Case of a Marijuana REIT
30 Pages Posted: 21 Feb 2017 Last revised: 9 Jun 2018
Date Written: February 15, 2017
We examine the IPO spillover effects using the case of Innovative Industrial Properties (IIPR). IIPR, as a new REIT firm that focuses on marijuana facilities, provides a unique opportunity to study both the contagion effects and competition effects within the REIT industry and the marijuana industry. We find that direct competing firms, such as healthcare REITs and marijuana stocks, are affected more by IIPR IPO than indirect competing firms. By investigating the price reactions to the announcement date, the downsize date, and the IPO completion date from IIPR’s competitors, we show that healthcare REITs and marijuana stocks experience negative abnormal returns during the event periods. The results suggest that the negative externalities from IIPR IPO might be due to the high level of uncertainty associated with the marijuana industry.
Keywords: REIT, IPO, Spillover Effect, Uncertain Industry, Marijuana
JEL Classification: G1, G38, D83
Suggested Citation: Suggested Citation