Business, Management and Accounting
8 years ago

Underwriters' power in IPO allocations influences pre-market price discovery.

SSRN Electronic Journal
When Bookbuilding Meets IPOs
Amit Bubna, Nagpurnanand Prabhala

Paper Summary

Bookbuilding, a common way to offer IPOs, gives underwriters power over who gets shares. In India, when underwriters control allocations, IPOs are less underpriced. But when rules stop discrimination in allocations, underpricing increases. Underwriters use information to decide who gets shares, affecting the IPO price.

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