Valuation Uncertainty and Short-Sales Constraints: Evidence from the IPO Aftermarket

We use the initial public offering (IPO) setting to provide evidence that the combination of valuation uncertainty and short-sales constraints generates significant equity market mispricing. The IPOs that we predict to be most susceptible to overpricing in the immediate aftermarket have first-day returns of +47% and lockup expiration returns of [Formula: see text]9%. Our detailed analysis of securities lending market data confirms that these IPOs experience severe short-sales constraints that peak around the lockup expiration. Our paper both explains the anomalous pricing of IPOs and highlights the importance of valuation uncertainty and short-sales constraints in explaining equity mispricing. This paper was accepted by Brian Bushee, accounting.

• 저널Management Science · 68(1) · 608–634
• 토픽Financial Markets and Investment Strategies · Finance
• DOI10.1287/mnsc.2020.3900
• 저자Panos N. Patatoukas, Richard G. Sloan, Annika Yu Wang