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The Initial Public Offerings of Listed Firms
Author(s) -
DERRIEN FRANÇOIS,
KECSKÉS AMBRUS
Publication year - 2007
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.2007.01212.x
Subject(s) - initial public offering , equity (law) , business , valuation (finance) , private investment in public equity , finance , market timing , monetary economics , valuation effects , equity financing , public offering , economics , private equity fund , debt , political science , law
A number of firms in the United Kingdom list without issuing equity and then issue equity shortly thereafter. We argue that this two‐stage offering strategy is less costly than an initial public offering (IPO) because trading reduces the valuation uncertainty of these firms before they issue equity. We find that initial returns are 10% to 30% lower for these firms than for comparable IPOs, and we provide evidence that the market in the firm's shares lowers financing costs. We also show that these firms time the market both when they list and when they issue equity.