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Initial Public Offering Allocations, Price Support, and Secondary Investors

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  • Fjesme, Sturla Lyngnes

Abstract

Tying initial public offering (IPO) allocations to after-listing purchases of other IPO shares as a form of price support has generated much theoretical interest and media attention. Price support is price manipulation and can reduce secondary investor return. In the past, obtaining data to investigate price support has proven to be difficult. I document that price support is harming secondary investor return using new data from the Oslo Stock Exchange. I also show that investors who engage in price support are allocated more future oversubscribed allocations, whereas harmed secondary investors significantly reduce their future participation in the secondary market.

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  • Fjesme, Sturla Lyngnes, 2016. "Initial Public Offering Allocations, Price Support, and Secondary Investors," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 51(5), pages 1663-1688, October.
    • Handle: RePEc:cup:jfinqa:v:51:y:2016:i:05:p:1663-1688_00
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    Cited by:

    1. Chong, Beng Soon & Liu, Zhenbin, 2020. "Issuer IPO underpricing and Directed Share Program (DSP)," Journal of Empirical Finance, Elsevier, vol. 56(C), pages 105-125.
    2. Lokman Tutuncu, 2020. "Initial public offering price support, valuation, and returns," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(2), pages 267-282, June.
    3. Sturla Lyngnes Fjesme, 2019. "When do investment banks use IPO price support?," European Financial Management, European Financial Management Association, vol. 25(3), pages 437-461, June.
    4. Fjesme, Sturla Lyngnes & Lv, Jin Roc & Shekhar, Chander, 2023. "The world cup in football and the US IPO market," Journal of Corporate Finance, Elsevier, vol. 80(C).
    5. Fjesme, Sturla Lyngnes, 2020. "Retail investor experience, asset learning, and portfolio risk-adjusted returns," Finance Research Letters, Elsevier, vol. 36(C).

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