Refiling Behavior in the IPO Pricing Process

Abstract

This paper investigates the refiling behavior (updating a new price range in later amendments rather than in the final prospectus) in the price-setting process of Initial Public Offerings (IPOs). 185 out 422 IPOs in our sample (43.8%) have refiled at least once during their pricing period. The probability of refiling is primarily determined by firm-specific characteristics and valuation uncertainty rather than the ex ante uncertainty about the IPOs. The number of refilings is moderately predicted by firm-specific characteristics but seems to depend on the information learned during the pricing period. The refiling price revisions (the deviation between the midpoints of the refiling price range and the file price range) share similar determinants with the traditional price revisions (the difference between the offer price and the midpoint of the file price range). We find that the issuers tend to partially adjust the refiling price with respect to the negative information incurred at the refiling but partially adjust the offer price with respect to the positive information obtained from the refiling to the offering. It provides complementary evidence about how the negative information may be fully incorporated into the offer price. The refiling IPOs tend to have greater price revisions than the non-refiling IPOs but the effects of the refiling behavior on the initial returns is indirect. We investigate the underlying rationales of the refiling behavior. The argument that refiling is to conform to the SEC regulation cannot fully explain this behavior. Our empirical analysis mainly supports the hypothesis of refiling for information-acquisition. Limited evidence is found for the other hypotheses, such as refiling for uncertainty, quality signaling and the positive-feedback strategy.