Penny Stock Ipos

26 Pages Posted: 14 Jun 2006

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

John Cooney

Texas Tech University - Rawls College of Business

Steven D. Dolvin

Butler University

Bradford D. Jordan

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

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Abstract

We examine underpricing, long-run returns, lockup periods, and gross spreads for penny stock IPOs over the 1990-1998 period. We find that penny stock IPOs have higher initial returns than ordinary IPOs, but significantly worse long-run underperformance. We also find that penny stock IPOs have longer lockup periods and larger gross spreads. To explore the effect of potential market manipulation, we examine IPOs led by a group of underwriters that were the subject of SEC enforcement actions and/or other penalties. Penny stock issues led by these banks are particularly underpriced and underperform ordinary IPOs led by other underwriters.

Suggested Citation

Bradley, Daniel and Cooney, John W. and Dolvin, Steven D. and Jordan, Bradford D., Penny Stock Ipos. Financial Management, Vol. 35, No. 1, Spring 2006, Available at SSRN: https://ssrn.com/abstract=908716

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

John W. Cooney

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States
806-834-1536 (Phone)

Steven D. Dolvin

Butler University ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States

Bradford D. Jordan

University of Florida ( email )

Gainesville, FL 32611
United States

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

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

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