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Dotcom Extreme Underpricing

FRB of Cleveland Working Paper No. 17-14. doi/10.26509/wp-201714.

31 Pages Posted: 9 Aug 2017

See all articles by Antonio Gledson De Carvalho

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo

Roberto Pinheiro

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Joelson Oliveira Sampaio

Getulio Vargas Foundation (FGV), Sao Paulo School of Economics, Students

Date Written: July 25, 2017

Abstract

We conjecture that the Dotcom abnormal underpricing resulted from the emergence a large cohort of firms racing for market leadership/survivorship. Fundamentals pricing at the IPO was part of their strategy. Consistent with our conjecture, firms’ strategic goals and characteristics fully explain the abnormal underpricing. Contrary to alternatives explanations, underpricing was not associated with top underwriting; there was no deterioration of issuers’ quality; and top underwriters and analysts became more selective.

Keywords: Internet bubble, underpricing, spinning, analyst lust, risk composition hypothesis

JEL Classification: G14, G24, L1, O33

Suggested Citation

De Carvalho, Antonio Gledson and Pinheiro, Roberto and Sampaio, Joelson Oliveira, Dotcom Extreme Underpricing (July 25, 2017). FRB of Cleveland Working Paper No. 17-14. doi/10.26509/wp-201714.. Available at SSRN: https://ssrn.com/abstract=3015326 or http://dx.doi.org/10.2139/ssrn.3015326

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo ( email )

R. Itapeva, 474 - 7o. andar
Sao Paulo 01313-902
Brazil
+5511 3281-7767 (Phone)

Roberto Pinheiro (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

Joelson Oliveira Sampaio

Getulio Vargas Foundation (FGV), Sao Paulo School of Economics, Students ( email )

Rua Itapeva 474 s.1202
São Paulo
Brazil

HOME PAGE: http://eesp.fgv.br/

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