IPO underpricing in the second and main markets: The case of the London Stock Exchange

• Author: Francisco J. Ruiz‐Cabestre,Ana C. Díaz‐Mendoza,Miguel Á. Acedo‐Ramírez
• DOI: http://doi.org/10.1111/infi.12137
• Date: 01 May 2019
• Published date: 01 May 2019

103

International Finance. 2019;22:103–117. wileyonlinelibrary.com/journal/infi © 2018 John Wiley & Sons Ltd

DOI: 10.1111/infi.12137

ORIGINAL MANUSCRIPT

IPO underpricing in the second and main markets:

The case of the London Stock Exchange

*

Miguel Á. Acedo-Ramírez

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Ana C. Díaz-Mendoza

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Francisco J. Ruiz-Cabestre

University of La Rioja, Logroño, La

Rioja, Spain

Correspondence

Miguel Á. Acedo-Ramírez, Universidad

de La Rioja, Dpto. Economía y Empresa,

C/ La Cigüeña 60, 26.004 Logroño

(La Rioja), Spain.

Email: miguel-angel.acedo@unirioja.es

Funding information

University of La Rioja, Grant number:

EGI2018/24; Ministry of Economy and

Competitiveness of Spain, Grant number:

ECO2016-77631-R

Abstract

This study contributes to a broader knowledge of initial

public offerings (IPOs) underpricing in second and main

markets. We analyse the particular case of the London Stock

Exchange. In the second market, we distinguish between

those companies that do not meet the main market listing

requirements and those companies that, even though they

meet the main market listing requirements, decide to float

on the second market. The results show that there is less

underpricing for firms that float on the main market than for

companies listed on the second market regardless of

whether those companies meet the main market listing

requirements. Moreover, behind the underpricing, we find

several variables related to firm and/or offering character-

istics and market information and observe different

behaviours in the explanatory variables for underpricing

depending on the group to which the company belongs.

1

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INTRODUCTION

This paper shows that the underpricing of initial public offerings (IPOs) differs between second and main

markets. These differences depend on whether companies meet the main market (MM) listing

requirements (LRs). In addition, the behaviour of the explanatory variables, which are behind the IPO

underpricing, also differs (in terms of sign, magnitude, and significance level) between companies listed

on the second and main markets. This behaviour depends on whether the companies meet the MM LRs.

*This paper is dedicated to the memory of professor Rafael Santamaría Aquilué, 1961–2018