UK IPO underpricing and venture capitalists

Jerry Coakley, Leon Hadass, Andrew Wood*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We analyze the nature and causes of short-run underpricing for a unique sample of 591 Initial Public Offers (IPOs) issued on the London Stock Exchange for the period 1985-2003. We find significant differences between the 1998-2000 bubble years and the rest of the sample. Venture capitalists and reputable underwriters played a certification role in the latter period but not during the bubble years. These years featured significant increases in underpricing, money left on the table, and a decline in operating quality. The combination of venture capitalists and prestigious underwriters was increasingly associated with the highest underpricing witnessed during 1998-2000, which provides indirect support for the spinning hypothesis.

Original languageEnglish
Pages (from-to)421-435
Number of pages15
JournalEuropean Journal of Finance
Volume15
Issue number4
DOIs
Publication statusPublished - Jun 2009

Keywords

  • Certification hypothesis
  • IPO underpricing
  • Spinning
  • Venture capital

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