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Title:Optimal IPO design with informed trading PDF Logo
Authors:Parlane, Sarah
Rousseau, Fabrice
Issue Date:2007
Series/Report no.:Working paper series // UCD Centre for Economic Research 2007/06
Abstract:We characterize optimal IPO design in the distinct adverse selection problems: one affecting the IPO stage and one arising in the after-market. Allocating shares to an investor with superior information in the after-market depresses the share's value to less informed investors. However, because it facilitates truthful interest report at the IPO stage it increases the expected offer price provided disadvantaged investors are sufficiently unlikely to flip their share. We compare the book-building's outcome to that of uniform price auction. The auction can enhance the expected offer price only if it systematically allocates a share to the strategic trader.
Subjects:Initial Public Offering
Book-building
Auction
Informed Trading
Secondary Market and Dealer Market
JEL:G24
G32
Document Type:Working Paper
Appears in Collections:Working Paper Series, UCD School of Economics, University College Dublin (UCD)

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