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Rationale behind IPO Underpricing: Evidence from Asian REIT IPOs
Author(s) -
Ooi Joseph T.L.,
Mori Masaki,
Wong WoeiChyuan
Publication year - 2018
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12243
Subject(s) - initial public offering , issuer , real estate investment trust , business , net asset value , monetary economics , asset (computer security) , financial system , economics , finance , real estate , computer security , computer science
This article examines the rationale behind IPO underpricing using a sample of REIT IPOs in Asia. Although the IPOs registered an average initial return of 3.08%, the issuers were able to sell the IPO shares above their fundamental values by timing the listings in periods when existing REIT stocks are traded at a premium to their net asset values (NAV). An IPO could therefore be underpriced and yet produce a net gain for the issuer. The issuers’ net gain from IPO is, however, negatively related to long‐run performance of REIT IPOs.