The role of admission documents on the pricing of UK fixed priced IPOs

Using text analysis, we investigate the impact of the length of prospectuses on IPO pricing for a sample of UK Fixed Priced IPOs between 2004 and 2012 and show more information in the prospectus improves price accuracy as longer admission documents exhibit higher offer price and less underpricing. W...

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Bibliographic Details
Published in:Economics letters 2018-12, Vol.173, p.44-46
Main Authors: Falconieri, Sonia, Tastan, Mesut
Format: Article
Language:English
Subjects:
Admission document
Fishing
Fixed prices
Fixed-price IPOs
Initial public offerings
Pilot fishing
Prospectus
Stock prices
Text analysis
Underpricing
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Summary:Using text analysis, we investigate the impact of the length of prospectuses on IPO pricing for a sample of UK Fixed Priced IPOs between 2004 and 2012 and show more information in the prospectus improves price accuracy as longer admission documents exhibit higher offer price and less underpricing. We explain the effect on the offer price as the consequence of the “pilot fishing” stage which seems to characterize a lot of UK IPOs. •Longer admission documents reduce the IPO underpricing of fixed-priced offerings.•The length of the prospectus also has a positive impact on the final offer price.•The evidence is consistent with the existence of a “pilot fishing” stage.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2018.09.007