The Choice between Firm-Commitment and Best-Efforts Offering Methods in IPOs: The Effect of Unsuccessful Offers

Bookbuilding, the option to withdraw, and the timing of IPOs

“…Dunbar (1998) investigates empirically the impact of the withdrawal possibility on the issuer's choice of the underwriting contract, firmcommitment vs. best-efforts. His analysis, however, does not incorporate the fact that withdrawal is an doptionT in the hands of the issuer of a firm-commitment offering, and naturally does not investigate the impact of this option on underpricing or the timing of IPOs.…”

Post IPO Withdrawal Outcomes

“…Approximately 20% of all companies in the U.S. that begin the formal IPO filing process by filing security registration documents with the Securities and Exchange Commission (SEC), however, do not complete the process and withdraw their offering from registration (see Dunbar, 1998, Busaba, Benveniste and Guo, 2001, Dunbar and Foerster, 2008, and Boeh and Southam, 2011. In some years (e.g., 2001) the majority of IPOs filed with the SEC are withdrawn.…”

Strategic waiting in the IPO markets

“…Once the capital K is available, however, the project's success is affected only by the firm-quality. 15 γ represents the type of costs described in Dunbar (1998). Since his empirical findings indicate that there are many IPOs that do fail (a withdrawn IPO) and they incur substantial costs due to it, we consider the model with presence of exogenous costs (i.e., γ) to be more relevant.…”