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IPO Pricing, Block Sales, and Long‐Term Performance
Author(s) -
PukthuanthongLe Kuntara,
Varaiya Nikhil
Publication year - 2007
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2007.00174.x
Subject(s) - initial public offering , business , valuation (finance) , block (permutation group theory) , expiration , valuation effects , monetary economics , finance , economics , mathematics , psychology , geometry , respiratory system , psychiatry
Block sales following IPOs are related to the IPOs' value relative to an estimate of intrinsic value, opening‐trade return, and IPO size. Overvalued IPOs experience more block sales than undervalued IPOs. IPOs with high block sales outperform IPOs with low block sales from 20 days after IPO through lockup expiration; however, IPOs with high block sales underperform IPOs with low block sales from lockup expiration through the third year after the IPO. The results indicate that block traders are advantaged relative to other traders; whether the advantage is based on superior information or superior valuation capabilities is unknown.