Publicly available information and the pricing of book built IPOs: Evidence from India

The pricing of initial public offering (IPO) plays a vital role for both the issuers and the investors. Therefore they also have a profound impact on the activities of primary and secondary capital markets. Extensive literature on pricing of IPOs has reported a significant mis-pricing across countries during different time periods. The present study analyzes the pricing of 207 book built IPOs listed on Bombay Stock Exchange (BSE) during the period from April 2004 to August 2009.The issuers provide rich information regarding their company and the issue pertaining to IPO before it gets listed. Therefore the study aims to find out how far the publicly available information about an IPO is affecting its pricing on the listing day. Furthermore the study identified the determinants of subscription pattern and opening returns on the listing day. It was found that different categories of investors do not subscribe independently. They instead look to the more informed investors to base their decisions. The results suggest that the issuers need to consider the impact of publicly available information before they decide the issue price.