Articlegreen2006

IPO Pricing with Bookbuilding and a When-Issued Market

Wolfgang Aussenegg · Pegaret Pichler · Alex Stomper

79 citations0/0 files storedJournal of Financial and Quantitative Analysis

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

Abstract We study IPO pricing in Germany to determine whether when-issued trading provides information that is useful for setting IPO offer prices, and whether such trading supplants bookbuilding as a source of information. We find that when-issued trading reveals relevant information for pricing IPOs, and that, once when-issued trading has begun, bookbuilding is not a source of costly information for pricing. But bookbuilding does not appear to be fully supplanted as a source of pricing information. We find evidence consistent with bookbuilding being used to gather information prior to the onset of when-issued trading.

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References

1985Bid, ask and transaction prices in a specialist market with heterogeneously informed traders 1977INFORMATIONAL ASYMMETRIES, FINANCIAL STRUCTURE, AND FINANCIAL INTERMEDIATION 1977Informational Asymmetries, Financial Structure, and Financial Intermediation 1990Initial Public Offerings and Underwriter Reputation 1989How investment bankers determine the offer price and allocation of new issues 2004Why Has IPO Underpricing Changed Over Time 2002Why Don’t Issuers Get Upset About Leaving Money on the Table in IPOs?1986Information quality and the valuation of new issues

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