Why Don't IPO Firms Disclose A Reservation Price?
- Topics:
- IPO
- Tags:
- Finance,
- Financial Planning,
- Financial Services,
- Investment,
- IPO,
- Price,
- University Of Western Ontario
- Source:
- University of Western Ontario
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Overview: A significant proportion of IPOs (Initial Public Offering) filed with the SEC are withdrawn during bookbuilding when it becomes clear to the issuer that they will not achieve a minimum acceptable offer price. Why don't issuers disclose this price at the outset? This question is important given that in many auction designs, including some for IPOs in other countries, a reservation price is formally posted, and the auction literature has shown that posting a reservation price can be optimal. This paper explains why the firms that would benefit from the disclosure of a reserve price are those least likely to file for an IPO in the first place, explaining why firms that do file are not observed to post a reservation price.
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Format: PDF | Size: 668KB | Date: Jun 2005 | Pages: 36
