Underpricing in U.S. IPOs during crisis

Abstract

This thesis provides a theoretical and empirical explanation of the underpricing phenomenon in Initial Public Offerings (IPOs) by using data from the U.S. Stock Exchanges. A theoretical presentation of the reasons of underpricing and the IPO market characteristics are extensively discussed. This study mainly refers to the periods “January 2007 – December 2009” which is considered as part of the Global Financial Crisis. The degree of underpricing is lower than the historical underpricing level in U.S. Exchange Market.The variables used to test the underpricing phenomenon, are the Firm’s Age, the IPO Gross Proceeds, the possibility of a firm to has secondary shares, the number of underwriters hired by each firm, the underwriters reputation, the firm’s assets, the total debt of the firm, sales per share and earnings per share. All these variables follow existing literature. They are used in order to test the effect of the Initial Theoretical Hypothesis of the Underpricing Phenomenon in U.S. The variable that was found significant in at least 10% confidence level is the total debt of the firm.