Price Discovery from Offer Price to Opening Price of Initial Public Offerings

54 Pages Posted: 7 Jul 2021 Last revised: 16 Jul 2023

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ; European Corporate Governance Institute (ECGI)

Yanbin Wu

University of Florida - Department of Finance, Insurance and Real Estate

Date Written: July 1, 2023

Abstract

We examine the price discovery process during preopening of initial public offerings
(IPOs). The average time spent in preopening has increased from 20 minutes
in 2010 to 77.23 minutes in 2020. Each phase of preopening contributes to
incremental price discovery for most IPOs, with almost all of the first day’s price
adjustment occurring during preopening. In contrast, for “cold” IPOs, half of the
price adjustment takes place after the market opens. Canceled orders also play a
role in price discovery. Underwriters make use of the discretion given to them
after the Facebook IPO debacle in deciding when to release an IPO for trading.g.

Keywords: Initial Public Offerings, SPACs, Retail Investors, Price Discovery, Opening Cross, Auction

JEL Classification: G14, G23, G24, G28

Suggested Citation

Aggarwal, Reena and Wu, Yanbin, Price Discovery from Offer Price to Opening Price of Initial Public Offerings (July 1, 2023). Georgetown McDonough School of Business Research Paper No. 3874314, Available at SSRN: https://ssrn.com/abstract=3874314 or http://dx.doi.org/10.2139/ssrn.3874314

Reena Aggarwal (Contact Author)

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://https://gufaculty360.georgetown.edu/s/contact/00336000014RhE9AAK/reena-aggarwal

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Yanbin Wu

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

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