IPO Pricing in the Dot-Com Bubble

Ljungqvist, Alexander; Wilhelm, William J.

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IPO Pricing in the Dot-Com Bubble

CEPR Discussion Paper No. 3314

41 Pages Posted: 14 May 2002

See all articles by Alexander Ljungqvist

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

William J. Wilhelm

University of Virginia - McIntire School of Commerce

There are 3 versions of this paper

Date Written: April 2002

Abstract

IPO initial returns reached astronomical levels during 1999-2000. We show that the regime shift in initial returns and other elements of pricing behaviour can be at least partially accounted for by a variety of marked changes in pre-IPO ownership structure and insider selling behaviour 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 behaviour followed from incentives created by these characteristics.

Keywords: Initial public offerings, underpricing, intermediation, Internet, hot issue markets

JEL Classification: G24, G32

Suggested Citation: Suggested Citation

Ljungqvist, Alexander and Ljungqvist, Alexander and Wilhelm, William J., IPO Pricing in the Dot-Com Bubble (April 2002). CEPR Discussion Paper No. 3314, Available at SSRN: https://ssrn.com/abstract=312014