Efeitos da Estabilização de Preços sobre os Retornos de Curto Prazo dos IPOs

During the price stabilization in IPOs the underwriter repurchases partof the issue (ASC for aftermarket short covering). Such activity raisesquestion about its real purpose: to keep price artificially high and deceiveinvestors, or avoid price fluctuation resulting from the initial flow ofinformation and the action of flippers. Our analysis indicates that in thepost stabilization period stabilized IPOs underperform non-stabilized ones;the higher the intensity of the stabilization the lower arepost-stabilization returns; IPOs for which the overallotment is fullycovered in the ASC underperform non-stabilized IPOs in thepost-stabilization period; the same does not happen when the ASC is onlypartial. Therefore, both views of the stabilization process are partiallyright: in some cases, stabilization is used to avoid price volatility and inother cases to keep price artificially high.