Business, Management and Accounting
4 years ago

Second-time IPOs priced at discount due to previous withdrawal stigma.

Financial Management
Does the Market Incorporate Previous IPO Withdrawals When Pricing Second‐Time IPOs?
Qin Lian, Qiming Wang

Paper Summary

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The study looked at companies that tried to go public, failed, then tried again. These "second-time IPOs" were found to be priced lower than similar companies that succeeded on their first try. Even if the company changed underwriters for the second attempt, the discount still existed. However, the long-term performance of these second-time IPOs was similar to companies that succeeded on their first try. This suggests that the market takes into account the negative information from the first failed attempt when pricing second-time IPOs.