Business, Management and Accounting
3 years ago

Competitive IPOs empower issuers, reduce conflicts, and enhance market control.

European Financial Management
Competitive IPOs
Tim Jenkinson, Howard Jones

Paper Summary

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Competition among investment banks for IPO deals is intense, but once a bank is chosen, the issuer's power diminishes. To address potential conflicts of interest, some European IPOs have adopted a new approach called "competitive IPOs." In these cases, the roles of preparing and distributing the IPO are separated, allowing the issuer more control and enabling flexible fee structures. This method helps prevent issues like "bait and switch" tactics. Competitive IPOs are a market-based solution that maintains the benefits of investment banks' involvement in IPOs while reducing conflicts of interest.