IPO Pricing in the Dot-Com Bubble: Complacency or Incentives?
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
December 11, 2001
NYU Stern School of Business Finance Dept. FIN-01-061
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.
Number of Pages in PDF File: 40
Keywords: Initial public offerings, Underpricing, Intermediation, Internet, Hot issue markets
JEL Classification: G32, G24
Date posted: January 9, 2002