Initial Public Offerings on the UK When-Issued Market

Abstract

We examine the determinants of an initial public offering (IPO) firm’s choice to trade on a when-issued market and find that better quality firms are more likely to trade on this market. Our ‘what-if’ analysis shows that for companies choosing when-issued trading, the actual offer price is almost 25% higher than it would have been had these firms chosen not to trade on this market. We interpret this higher offer price as ‘rent’ that investors pay to acquire shares of such companies. Interestingly, this rent is paid mostly in those IPOs in which retail investors are allowed to participate.