Penny stock IPOs

Daniel J. Bradley; John W. Cooney; Steven D. Dolvin; Bradford D. Jordan

doi:10.1111/j.1755-053X.2006.tb00129.x

Penny stock IPOs

Daniel J. Bradley, John W. Cooney, Steven D. Dolvin, Bradford D. Jordan

Business Administration

Research output: Contribution to journal › Review article › peer-review

54 Scopus citations

Abstract

We examine underpricing, long-run returns, lockup periods, and gross spreads for penny stock IPOs over the 1990-1998 period. We find that penny stock IPOs have higher initial returns than ordinary IPOs, but significantly worse long-run underperformance. We also find that penny stock IPOs have longer lockup periods and larger gross spreads. To explore the effect of potential market manipulation, we examine IPOs led by a group of underwriters that were the subject of SEC enforcement actions and/or other penalties. Penny stock issues led by these banks are particularly underpriced and underperform ordinary IPOs led by other underwriters.

Original language	English
Pages (from-to)	5-29
Number of pages	25
Journal	Financial Management
Volume	35
Issue number	1
DOIs	https://doi.org/10.1111/j.1755-053X.2006.tb00129.x
State	Published - 2006

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title = "Penny stock IPOs",

abstract = "We examine underpricing, long-run returns, lockup periods, and gross spreads for penny stock IPOs over the 1990-1998 period. We find that penny stock IPOs have higher initial returns than ordinary IPOs, but significantly worse long-run underperformance. We also find that penny stock IPOs have longer lockup periods and larger gross spreads. To explore the effect of potential market manipulation, we examine IPOs led by a group of underwriters that were the subject of SEC enforcement actions and/or other penalties. Penny stock issues led by these banks are particularly underpriced and underperform ordinary IPOs led by other underwriters.",

author = "Bradley, {Daniel J.} and Cooney, {John W.} and Dolvin, {Steven D.} and Jordan, {Bradford D.}",

year = "2006",

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AU - Cooney, John W.

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AU - Jordan, Bradford D.

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AB - We examine underpricing, long-run returns, lockup periods, and gross spreads for penny stock IPOs over the 1990-1998 period. We find that penny stock IPOs have higher initial returns than ordinary IPOs, but significantly worse long-run underperformance. We also find that penny stock IPOs have longer lockup periods and larger gross spreads. To explore the effect of potential market manipulation, we examine IPOs led by a group of underwriters that were the subject of SEC enforcement actions and/or other penalties. Penny stock issues led by these banks are particularly underpriced and underperform ordinary IPOs led by other underwriters.

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Penny stock IPOs

Abstract

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