Initial Public Offering Price Support and Ownership Structures

Forthcoming in the Scandinavian Journal of Business Research

11 Pages Posted: 12 Jan 2021

Date Written: November 27, 17

Abstract

Shares sold through Initial Public Offerings (IPOs) are often underpriced and therefore very popular investment objects. Fjesme (2016) documents that the allocating investment bank requires certain larger investors in popular IPOs to also purchase more shares after the stock exchange listing. This additional buying supports prices and attracts more attention to the companies in the short term. Wilhelm (1999) explains how non-professional investors are likely to misunderstand this price support as positive information and thereby increase their investment. Obtaining data to investigate the implications of price support on investor holdings has proven difficult in the past. In this paper, I investigate actual IPO allocations combined with trading after the listing on the Oslo Stock Exchange (OSE). I document that increased price support generates a large influx of domestic and retail ownership as opposed to foreign institutional ownership. I conclude that price support reduces international institutional ownership on the OSE.

Keywords: Initial Public Offerings, IPO allocations, Price support, Ownership structure, Retail investors

JEL Classification: G24

Suggested Citation

Fjesme, Sturla Lyngnes, Initial Public Offering Price Support and Ownership Structures (November 27, 17). Forthcoming in the Scandinavian Journal of Business Research, Available at SSRN: https://ssrn.com/abstract=3738450 or http://dx.doi.org/10.2139/ssrn.3738450

Sturla Lyngnes Fjesme (Contact Author)

Oslo Business School ( email )

P.O. Box 4
Oslo, 0130
Norway

HOME PAGE: http://sturlafjesme.com/

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