Partial Adjustment of Shares Issued and IPO Underpricing

Abstract

Existing research finds that changes to expected offer prices of IPOs are correlated to initial returns. This study finds that shares issued are also partially adjusted while increases in shares outstanding are associated with lower initial returns. The effect of the shares issued adjustment is greater when it is negative, contrary to the price adjustment. An adjustment to shares issued may enhance or diminish the effect of a price adjustment on initial returns. This study also finds that public information if more fully included into the original shares issued and shares outstanding amounts than it is for price.