Rationale behind IPO underpricing: evidence from Asian REIT IPOs

• Main Authors: Ooi, Joseph T.L., Mori, Masaki, Wong, Woei Chyuan
• Format: Article
• Language: English
• Published: John Wiley & Sons, Inc. 2018
• Subjects: HC Economic History and Conditions
• Online Access: http://repo.uum.edu.my/25636/1/Ooi_et_al-2019-Real_Estate_Economics.pdf; http://repo.uum.edu.my/25636/; http://doi.org/10.1111/1540-6229.12243

This article examines the rationale behind IPO underpricing using a sample of REIT IPOs in Asia. Although the IPOs registered an average initial return of 3.08%, the issuers were able to sell the IPO shares above their fundamental values by timing the listings in periods when existing REIT stocks are traded at a premium to their net asset values (NAV). An IPO could therefore be underpriced and yet produce a net gain for the issuer. The issuers’ net gain from IPO is, however, negatively related to long‐run performance of REIT IPOs.