The '7% Solution' and IPO (Under)Pricing
UNIVERSITY OF TECHNOLOGY SYDNEY
Finance Department
Research Seminars in Finance
Topic: The '7% Solution' and IPO (Under)Pricing
Speaker: Felipe Restrepo, University of Western Ontario
Abstract: We investigate the effect of the “7% solution”—the fact that underwriters in the U.S. charge a 7% spread to most IPOs between $20 million and $100 million in size—on the ensuing pricing of the offerings. Our identification exploits the variation in spreads that is due to distinct kinks in the relation between spread and offer size at these two thresholds. We find that the spread positively influences underpricing but also the offer-price adjustment from the filing range’s midpoint. Our evidence indicates that the spread influences the aftermarket price, suggesting that underwriters can shape, not merely discover, investor valuations.
Moderator: Thomas Matthys, University of Technology Sydney
Date: Wednesday, 2nd September 2020
Time: 9.00 – 10.00 a.m. (Australian Eastern Standard Time)
Venue: This is on online Zoom webinar.
After registering, you will receive a confirmation email containing information on how to join the meeting, including an access link.
Seminar protocols:
- The webinar will run for 45 minutes, followed by a 15 minute Q&A session.
- There will be a moderator for each seminar event, who will facilitate communication and resolve any technical issues.
- Participants can use the Q&A facility to ask questions during the presentation. The moderator will then alert the speaker and ask the questions raised.
Co-ordinator: Harry Scheule
Enquiries: Duncan Ford
