Multiple lead underwriter IPOs and firm visibility

Jeon, Jin Q; Lee, Cheolwoo; Nasser, Tareque; Via, M. Tony

doi:10.1016/j.jcorpfin.2015.04.007

Cited by 23 publications

(16 citation statements)

References 80 publications

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“…In unreported results, as in Cook et al () and Jeon et al (), the median price update is zero, indicating that the midpoint of the initial price range and offer price are the same. This reflects the importance of the initial valuation and the role of retail attention since, for the median firm, the final valuation is merely a confirmation of the initial valuation (ignoring other factors that influence valuation).…”

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confidence: 65%

“…The percentage change from the midpoint of the initial price range to the offer price, commonly referred to as the price update, is used by numerous IPO studies to reflect institutional interest (e.g., Lowry and Schwert, ; Cook et al , ; Jeon et al , ). Furthermore, institutional ownership percentage and number of institutional owners after the IPO more directly capture institutional demand.…”

Section: Institutional Demand and Promotional Efforts Of Underwritersmentioning

confidence: 99%

“…These authors also report a positive relationship between pre‐offer publicity and IPO offer prices, an indication that underwriters can rely on promotional efforts to boost IPO valuations. Further, Jeon et al () find that post‐IPO institutional holdings are approximately 4.4% higher when multiple lead underwriters (MLUs) are involved with the IPO, as opposed to hiring a single lead underwriter. Moreover, if more co‐managers are associated with an IPO, this could lead to more institutional interest, since each co‐manager would have its own clientele.…”

Section: Institutional Demand and Promotional Efforts Of Underwritersmentioning

confidence: 99%

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Retail Investor Attention and IPO Valuation

Colaco

Cesari²,

Hegde

2017

Euro Fin Management

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Given restrictions placed on communication with prospective investors, retail investor attention can help firms/underwriters with the task of initially valuing an IPO. Using Google search volume to proxy for retail investor attention, we find that the presence of and an increase in retail attention following initial filing but prior to initial pricing are positively related to initial valuations. Our results are robust to alternative matching methods to identify our matched sample of non‐IPO firms and to including several controls for institutional demand. We conclude that retail investor attention plays a critical role in the early stages of IPO valuation.

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mentioning

confidence: 65%

Section: Institutional Demand and Promotional Efforts Of Underwritersmentioning

confidence: 99%

Section: Institutional Demand and Promotional Efforts Of Underwritersmentioning

confidence: 99%

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Retail Investor Attention and IPO Valuation

Colaco

Cesari²,

Hegde

2017

Euro Fin Management

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“…For example, Jeon et al. () suggest that IPO firms backed by private equity or venture capital firms have greater negotiating power (higher β) because these firms have well‐informed principals and repeat players in the IPO market. Burch, Nanda, and Warther () argue that investment banks with larger shares of IPO deals in an industry have a stronger bargaining position, implying lower firm β, while firms with larger offerings have greater negotiating power.…”

Section: Model Outcomes With Partial Bargaining Power and Noncompetitmentioning

confidence: 99%

Market Making Contracts, Firm Value, and the IPO Decision

Bessembinder¹,

Hao²,

Zheng

2015

The Journal of Finance

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We examine the effects of secondary market liquidity on firm value and the IPO decision. Competitive aftermarket liquidity provision is associated with reduced welfare and a discounted secondary market price that can dissuade IPOs. The competitive market fails in particular for firms or at times when uncertainty regarding fundamental value and asymmetric information are large in combination. In these cases, firm value and welfare are improved by a contract where the firm engages a designated market maker to enhance liquidity. Such contracts represent a market solution to a market imperfection, particularly for small, growth firms.

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“…For both single lead underwriter (SLU) and MLU IPOs, all potential investment banks compete for mandates in the syndicate before the underwriter selection. However, the lead underwriters in MLU IPOs compete even after the underwriter choice [1][2][3][4][5]. Increased competition in investment banking almost uniformly affects all investment banks, but the increased deal complexity and the competition in MLU IPOs after the selection are new and apply to MLUs only.…”

Section: Introductionmentioning

confidence: 99%

Sustainability of Analyst Recommendations in Multiple Lead Underwriter IPOs

2020

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Recently, a new organizational form of syndicate—multiple lead underwriter (MLU) initial public offerings (IPOs)—has emerged in IPOs. In addition to the increased deal complexity, lead underwriters in MLU IPOs face a new competition between them after underwriter selection, which is not present in single lead underwriter (SLU) IPOs. It is therefore questionable whether recommendations by analysts from lead underwriters of the MLU IPOs are as sustainable as those of the SLU IPOs. We examine IPO recommendations to capture how this new syndicate structure affects analyst behavior in terms of analyst optimism and investment value. In contrast to the popular conflict of interest perspective, our findings point to the notion that the new syndicate structure suppresses bias in recommendations and that reputation upholding incentive dominates pressure from competition. MLU-affiliated analysts are not more optimistic and provide more informative research coverage whose informativeness, however, fades away shortly after the recommendation releases. Our findings overall indicate the existence of sustainability in the MLU IPO recommendations.

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Multiple lead underwriter IPOs and firm visibility

Cited by 23 publications

References 80 publications

Retail Investor Attention and IPO Valuation

Retail Investor Attention and IPO Valuation

Market Making Contracts, Firm Value, and the IPO Decision

Sustainability of Analyst Recommendations in Multiple Lead Underwriter IPOs

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