Working Paper: CEPR ID: DP3644
Authors: Tim Jenkinson; Howard Jones
Abstract: This Paper uses evidence from a dataset of 27 European IPOs to analyse how investors bid and the factors that influence their allocations. We have the complete books for these deals ? amounting to 5540 bids ? and so can analyse directly how bids and allocations are related. All these deals are private sector IPOs where the bookrunner was a leading European investment bank. We make use of a unique ranking of investor quality, associated with the likelihood of flipping the IPO, as produced by a group of US and European investment banks. We find that 'high quality' investors are consistently favoured in allocation and in out-turn profits. We also find that bids submitted via the bookrunner and large bids received better pro-rata allocations and higher average profits. We find that a very small proportion of all bids submitted during the bookbuilding contain price limits ? especially in hot IPOs ? and, in contrast to Cornelli and Goldreich (2001), we do not find that that such bids are favoured in terms of allocation.
Keywords: bookbuilding; IPO
JEL Codes: G14; G24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High-quality investors (G23) | Allocation outcomes (G35) |
| Price-sensitive bids (D44) | Allocation outcomes (G35) |
| Timing of bids (D44) | Allocation outcomes (G35) |
| Nationality of the bidder (D44) | Allocation outcomes (G35) |
| Bid size (D44) | Allocation outcomes (G35) |