UK IPO underpricing and venture capitalists

Jerry Coakley, Leon Hadass and Andrew Wood ()

The European Journal of Finance, 2009, vol. 15, issue 4, 421-435

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.

Keywords: IPO underpricing; venture capital; certification hypothesis; spinning (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (11)

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DOI: 10.1080/13518470802560915

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