The Initial Public Offerings of Listed Firms




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    • Both authors are at the Joseph L. Rotman School of Management, University of Toronto. The authors thank an anonymous referee, Glen Arnold, Marc Barrachin of IDC, Bruno Biais, Neil Brisley, François Degeorge, Craig Doidge, Alexander Dyck, Laura Field, Ken French, Abdullah Iqbal, Tim Jenkinson, Raymond Kan, Alexander Ljungqvist, Jan Mahrt-Smith, Jay Ritter, Rob Stambaugh (the editor), Cliff Stephens, Kent Womack, and participants at the 2004 Northern Finance Association, 2005 European Finance Association, and 2006 American Finance Association meetings.


A number of firms in the United Kingdom list without issuing equity and then issue equity shortly thereafter. We argue that this two-stage offering strategy is less costly than an initial public offering (IPO) because trading reduces the valuation uncertainty of these firms before they issue equity. We find that initial returns are 10% to 30% lower for these firms than for comparable IPOs, and we provide evidence that the market in the firm's shares lowers financing costs. We also show that these firms time the market both when they list and when they issue equity.