Bookbuilding and Strategic Allocation

Cornelli, Francesca; Goldreich, David

doi:10.1111/0022-1082.00407

Cited by 372 publications

(174 citation statements)

References 35 publications

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“…When they choose to participate, they place orders that are virtually market orders. This can be compared with the results obtained by Cornelli and Goldreich (2001). Exploring the demand curves submitted by institutional investors in book‐built offerings, they find that these demand curves contain mostly limit orders and conclude that they are informative.…”

Section: Tests Of the Modelmentioning

confidence: 91%

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IPO Pricing in “Hot” Market Conditions: Who Leaves Money on the Table?

Derrien¹

2005

The Journal of Finance

418

124

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This paper explores the impact of investor sentiment on IPO pricing. Using a model in which the aftermarket price of IPO shares depends on the information about the intrinsic value of the company and investor sentiment, I show that IPOs can be overpriced and still exhibit positive initial return. A sample of recent French offerings with a fraction of the shares reserved for individual investors supports the predictions of the model. Individual investors' demand is positively related to market conditions. Moreover, large individual investors' demand leads to high IPO prices, large initial returns, and poor long-run performance. THE END OF THE NINETIES was one of the hottest IPO markets ever. In this period, both the number of initial public offerings and the level of initial returns have reached unprecedented peaks. Ritter 1 documents that in 1999 and 2000 only, 803 companies went public in the United States, raising about $123 billion and leaving about $62 billion on the table in the form of initial returns. Periodically, such periods of IPO euphoria occur. These so-called "hot issue" markets are characterized by high IPO volumes and high levels of initial return (see Ibbotson and Jaffe (1975) and Ritter (1984)), as well as positive serial correlation of IPO initial returns and correlation between recent levels of initial return and current IPO volume.Surprisingly, however, pre-IPO shareholders do not seem to be upset about leaving so much money on the table. Loughran and Ritter (2002) explain this phenomenon by the fact that insiders of IPO companies consider not only the shares they sell in the IPO, but also those they retain, which benefit from the large initial price run-up. Ljungqvist and Wilhelm (2003) show that during the 1999 to 2000 period, IPO companies were significantly different from usual * François Derrien is at the Rotman School of Management, University of Toronto. This article is a substantially revised version of one chapter of my dissertation at HEC.

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Section: Tests Of the Modelmentioning

confidence: 91%

“…3 3 For a detailed description of the book‐building mechanism, see for example Cornelli and Goldreich (2001). …”

mentioning

confidence: 99%

IPO Pricing in “Hot” Market Conditions: Who Leaves Money on the Table?

Derrien¹

2005

The Journal of Finance

418

124

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“…The evidence to date suggests that where bookbuilding is used, institutions do receive preferential allocations. Using U.S. data, Hanley and Wilhelm (1995) and Aggarwal, Prabhala, and Puri (2002) find that institutions are favored, as do Cornelli and Goldreich (2001) using U.K. data. Cornelli and Goldreich (2001) also find that more information‐rich requests are favorably rewarded.…”

Section: Ipo Activity: Choosing To Go Publicmentioning

confidence: 92%

“…Using U.S. data, Hanley and Wilhelm (1995) and Aggarwal, Prabhala, and Puri (2002) find that institutions are favored, as do Cornelli and Goldreich (2001) using U.K. data. Cornelli and Goldreich (2001) also find that more information‐rich requests are favorably rewarded. Future research is likely to further distinguish among different classes and characteristics of institutional investors.…”

Section: Ipo Activity: Choosing To Go Publicmentioning

confidence: 92%

A Review of IPO Activity, Pricing, and Allocations

Ritter¹,

Welch

2002

The Journal of Finance

1,935

288

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for comments, and Kenneth French for supplying factor returns. The authors maintain a more extensive bibliography of IPO-related work at http://www.iporesources.org. This website further contains links to many IPO-related sites and some reasonably up-to-date information on aggregate IPO activity and IPO working papers. The views expressed herein are those of the authors and not necessarily those of the National Bureau of Economic Research.

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“…Before an M&A, both good and bad targets have an incentive to increase marketing spending to either reveal undervaluation or deceive actual valuation. That is, if information creators reveal positive upside to the issue, they get awarded a higher share of the upcoming profits (Cornelli and Goldreich 2001). Once market participants revise the price of a high-value firm upward and revise the price of a low-value firm downward, a high-value firm continues its strategy of high marketing spending whereas a low-value firm discontinues the strategy.…”

Section: Ipo Processmentioning

confidence: 99%

Marketing Strategy After Meeting Wall Street: The Role of Information Asymmetry

Dewally

Huang

2017

J of Financial Research

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We relate marketing strategy to the initial public offering (IPO) process during 1980–2010. Pre‐IPO marketing intensity provides information to the market, which reduces underpricing and the magnitude of price revisions during the filing period. Firms that experience upward (downward) price revisions spend more (less) on marketing in the five years post‐IPO. We confirm that marketing spending is related to a firm's informational environment by finding a positive relation between marketing intensity and firm information transparency post‐IPO. This finding indicates that marketing spending is one channel through which a firm affects its perception by the public equity market at issuance and later.

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Bookbuilding and Strategic Allocation

Cited by 372 publications

References 35 publications

IPO Pricing in “Hot” Market Conditions: Who Leaves Money on the Table?

IPO Pricing in “Hot” Market Conditions: Who Leaves Money on the Table?

A Review of IPO Activity, Pricing, and Allocations

Marketing Strategy After Meeting Wall Street: The Role of Information Asymmetry

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