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Partial adjustment of hybrid book-building IPOs with a pre-IPO market

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  • Kao, Lanfeng
  • Chen, Anlin

Abstract

Partial adjustment of book-building IPOs is to compensate bidders for their revealing positive information and is well documented in the U.S. pure book-building IPOs. We find that partial adjustment does not exist in Taiwanese hybrid dual-tranche book-building with a clawback provision and a pre-IPO market. In Taiwanese book-building, underwriters collect demand information during the pre-marketing period to set a price range and collect retail subscribers’ interests during the pre-selling period and trading information in the pre-IPO market to set a final offer price. The dual-tranche with a clawback provision hinders bidders from divulging positive information during the pre-selling period. Attracting retail subscription in the dual-tranche hybrid book-building process hurts underwriters’ information acquisition from the bidders. Underwriters set the final offer price based on the free information of retail subscription and the trading information in the pre-IPO market rather than bidders’ private information.

Suggested Citation

  • Kao, Lanfeng & Chen, Anlin, 2019. "Partial adjustment of hybrid book-building IPOs with a pre-IPO market," The Quarterly Review of Economics and Finance, Elsevier, vol. 74(C), pages 292-300.
    • Handle: RePEc:eee:quaeco:v:74:y:2019:i:c:p:292-300
    DOI: 10.1016/j.qref.2019.01.005
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    Cited by:

    1. Kao, Lanfeng & Chen, Anlin & Krishnamurti, Chandrasekhar, 2020. "Outcome model or substitute model of D&O insurance on IPO pricing without information asymmetry before issuance," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    2. Kao, Lanfeng & Chen, Anlin & Lu, Cheng-Shou, 2022. "Retail investor attention and IPO prices with a pre-IPO market," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 416-432.

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    More about this item

    Keywords

    Hybrid book-building; Initial public offerings; Partial adjustment; Pre-IPO market;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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