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Session I-2 IPO & Mergers (17/12/2009 à 09h30)

U. Hege

Auctioned IPOs: The U.S. Evidence

Auteurs : François Degeorge (Swiss Finance Institute, University of Lugano); François Derrien (HEC Paris); Kent L. Womack (Tuck School of Business, Dartmouth College)

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Intervenants : François Derrien (HEC Paris)

Between 1999 and 2007, WR Hambrecht completed 19 IPOs in the U.S. using an auction mechanism. We analyze investor behavior and mechanism performance in these auctioned IPOs using detailed bidding data. The existence of some bids posted at high prices suggests that some investors (mostly retail) try to free-ride on the mechanism. But institutional demand in these auctions is very elastic, suggesting that institutional investors reveal information in the bidding process. Investor participation is largely predictable based on deal size, and demand is dominated by institutions. Flipping is equally prevalent in auctions as in bookbuilt deals – but unlike in bookbuilding, investors in auctions tend to flip their shares more in cold deals. Finally, we find that institutional investors, who provide more information, are rewarded by obtaining a larger share of the deals that have higher 10-day underpricing. Our results therefore suggest that auctioned IPOs could be an effective alternative to traditional bookbuilding.

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Shell Games: On the Stock Price Performance of Shell Companies

Auteurs : Ioannis V. Floros (College of Business, Iowa State University); Travis R. A. Sapp (College of Business, Iowa State University)

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Intervenants : Ioannis V. Floros

Rapporteurs : François Derrien

In each of the last eight years reverse mergers have outnumbered traditional IPOs as a mechanism for going public, and shell companies are providing fuel for much of this growth. We study 585 trading shell companies over the period 2006-2008. The purpose of most of these shell firms is to find a suitor for a reverse merger agreement. These companies have no systematic risk, operations, or assets, and their share price tends to decline over time. When a takeover agreement is consummated, shell company three-month abnormal returns are 48.1%. We argue that this exceptional return is compensation for shell stock illiquidity and the uncertainty of finding a reverse merger suitor.

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Pre-IPO dividend payments

Auteurs : Jens Martin (Swiss Finance Institute, University of Lugano); Richard Zeckhauser (John F. Kennedy School of Government, Harvard University)

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Intervenants : Jens Martin (Swiss Finance Institute, University of Lugano)

Rapporteurs : Ulrich Hege

We investigate dividend payments of companies prior to their IPOs. Our data sample consists of U.S companies conducting an IPO between 1980 through 2006. These dividend payments are significant both in number and size. We find support for the hypothesis that insiders seeking to exit use dividends as a means to avoid selling a large number of secondary shares in the IPO. Furthermore are managers actively managing their cash holdings prior the IPO. They try to avoid very high cash holdings. We reject the hypothesis that insiders try to strip the company off its hard assets in order to bring the overvalued part to the market.

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