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Dotcom Extreme Underpricing

Author

Listed:
  • Antonio Gledson de Carvalho
  • Roberto Pinheiro
  • Joelson Oliveira Sampaio

Abstract

We conjecture that the Dotcom abnormal underpricing resulted from the emergence a large cohort of firms racing for market leadership/survivorship. Fundamentals pricing at the IPO was part of their strategy. Consistent with our conjecture, firms? strategic goals and characteristics fully explain the abnormal underpricing. Contrary to alternatives explanations, underpricing was not associated with top underwriting; there was no deterioration of issuers? quality; and top underwriters and analysts became more selective.

Suggested Citation

  • Antonio Gledson de Carvalho & Roberto Pinheiro & Joelson Oliveira Sampaio, 2017. "Dotcom Extreme Underpricing," Working Papers (Old Series) 1714, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:fedcwp:1714
    DOI: 10.26509/frbc-wp-201714
    Note: Note: This paper is one of 2 originally posted as WP 16-33 in December 2016 and titled “The Dotcom Bubble and Underpricing: Conjectures and Evidence.” The original paper (WP 16-33) was split into 2 articles: WP 17-13 and this one (WP 17-14).
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    More about this item

    Keywords

    Internet bubble; underpricing; spinning; analyst lust; risk composition hypothesis;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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