The Breadth of IPO Marketing

49 Pages Posted: 22 Apr 2021 Last revised: 17 Oct 2022

See all articles by Matthew Gustafson

Matthew Gustafson

Pennsylvania State University - Smeal College of Business

Joseph J. Henry

Rowan University - Accounting & Finance

Emily Kim

University of Kansas - School of Business

Kevin Pisciotta

University of Kansas - School of Business

Date Written: October 12, 2022

Abstract

IPO underwriters face conflicting interests between issuers and institutional investors. The underwriter’s decision of how widely to market an offer plays a crucial role in how they manage these conflicting interests, as greater marketing breadth is beneficial to issuers but can be costly to underwriters’ reputations with preferred clients because of increased share rationing. We introduce a novel measure of IPO marketing breadth using the number of prospectuses underwriters distribute during the roadshow to empirically examine how underwriters manage this tradeoff. We find that underwriters market more widely when expected rationing risk is low and issuer bargaining power is high. We provide evidence that marketing breadth positively predicts pre-IPO price revisions, post-IPO liquidity, and underpricing; just over half of the pricing benefits accrues to underwriters and their clients, and the rest accrues to issuers.

Keywords: Bookbuilding; IPO Marketing; Initial Public Offerings; Information Dissemination

JEL Classification: G20, G24, G30

Suggested Citation

Gustafson, Matthew and Henry, Joseph J. and Kim, Emily and Pisciotta, Kevin, The Breadth of IPO Marketing (October 12, 2022). Available at SSRN: https://ssrn.com/abstract=3830911 or http://dx.doi.org/10.2139/ssrn.3830911

Matthew Gustafson

Pennsylvania State University - Smeal College of Business ( email )

East Park Avenue
University Park, PA 16802
United States

Joseph J. Henry (Contact Author)

Rowan University - Accounting & Finance ( email )

Glassboro, NJ 08028
United States

Emily Kim

University of Kansas - School of Business ( email )

Capitol Federal Hall
1654 Naismith Dr.
Lawrence, KS 66045
United States

Kevin Pisciotta

University of Kansas - School of Business ( email )

Capital Federal Hall
1654 Naismith Dr
Lawrence, KS 66045
United States

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