IPO Pricing in the Dot-Com Bubble
41 Pages Posted: 14 May 2002
Date Written: April 2002
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