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Bids and Allocations in European IPO Bookbuilding

Authors

  • TIM JENKINSON,

  • HOWARD JONES

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    • Tim Jenkinson is at the Saïd Business School, Oxford University and CEPR. Howard Jones is at the Saïd Business School, Oxford University. For helpful comments and suggestions, we thank Reena Aggarwal, Jos van Bommel, Laura Field, David Goldreich, Rick Green, Alexander Ljungqvist, Jay Ritter, Ann Sherman, Bill Wilhelm, an anonymous referee, and seminar participants at the Georgetown University McDonough School of Business, City University Business School, Exeter University, Oxford University, the January 2003 American Finance Association conference, and the March 2003 NYSE/Stanford IPO conference. Any errors are our own.


ABSTRACT

This paper uses evidence from a data set of 27 European IPOs to analyze how investors bid and the factors that influence their allocations. We also make use of a unique ranking of investor quality, associated with the likelihood of flipping the IPO. We find that investors perceived to be long-term holders of the stock are consistently favored in allocation and in out-turn profits. In contrast to Cornelli and Goldreich (2001), we find little evidence that more informative bids receive larger allocations or higher profits. Our results cast doubt upon the extent of information production during the bookbuilding period.

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