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

55 Pages Posted: 7 Jul 2021 Last revised: 11 Dec 2024

See all articles by Reena Aggarwal

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ; European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Yanbin Wu

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

Date Written: July 1, 2023

Abstract

We examine the preopening process and price discovery from the offer price to the first open price in initial public offerings. The extent of price discovery during preopening is influenced by firm characteristics and preopening attributes, such as volume of shares executed in preopening, canceled orders, order imbalance, and changes in indicative price. Institutional investors cancel four orders for every executed order. Each phase of preopening contributes to incremental price discovery. In “hot” IPOs, almost all price discovery occurs during preopening, whereas in “cold” IPOs, half of the price adjustment occurs after the market opens.

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

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

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

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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