IPO Pricing in the Dot-Com Bubble: Complacency or Incentives?

NYU Stern School of Business Finance Dept. FIN-01-061

40 Pages Posted: 9 Jan 2002  

Alexander Ljungqvist

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN)

William J. Wilhelm

University of Virginia - McIntire School of Commerce

Date Written: December 11, 2001

Abstract

IPO initial returns reached astronomical levels during 1999-2000. We show that the regime shift in initial returns and other elements of pricing behavior can be at least partially accounted for by a variety of marked changes in pre-IPO ownership structure and insider selling behavior over the period which reduced key decision-makers' incentives to control underpricing. After controlling for these changes, there appears to be little special about the 1999-2000 period, aside from the preponderance of internet and high-tech firms going public. Our results suggest that it was firm characteristics that were unique during the "dot-com bubble" and that pricing behavior followed from incentives created by these characteristics.

Keywords: Initial public offerings, Underpricing, Intermediation, Internet, Hot issue markets

JEL Classification: G32, G24

Suggested Citation

Ljungqvist, Alexander and Wilhelm, William J., IPO Pricing in the Dot-Com Bubble: Complacency or Incentives? (December 11, 2001). NYU Stern School of Business Finance Dept. FIN-01-061. Available at SSRN: https://ssrn.com/abstract=295662 or http://dx.doi.org/10.2139/ssrn.295662

Alexander Ljungqvist (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
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HOME PAGE: http://pages.stern.nyu.edu/~aljungqv

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR)

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European Corporate Governance Institute (ECGI)

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Belgium

Research Institute of Industrial Economics (IFN) ( email )

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Stockholm, SE-102 15
Sweden

William J. Wilhelm

University of Virginia - McIntire School of Commerce ( email )

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Charlottesville, VA 22904-4173
United States
434-924-7666 (Phone)
434-924-7074 (Fax)

HOME PAGE: http://gates.comm.virginia.edu/wjw9a/

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