Working Paper

Dotcom Extreme Underpricing

Abstract: We conjecture that the Dotcom abnormal underpricing resulted from the emergence a large cohort of firms racing for market leadership/survivorship. Fundamentals pricing at the IPO was part of their strategy. Consistent with our conjecture, firms? strategic goals and characteristics fully explain the abnormal underpricing. Contrary to alternatives explanations, underpricing was not associated with top underwriting; there was no deterioration of issuers? quality; and top underwriters and analysts became more selective.

Keywords: Internet bubble; underpricing; spinning; analyst lust; risk composition hypothesis; ;

JEL Classification: G14; G24; L1; O33;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2017-07-25

Number: 1714

Pages: 31 pages

Note: Note: This paper is one of 2 originally posted as WP 16-33 in December 2016 and titled “The Dotcom Bubble and Underpricing: Conjectures and Evidence.” The original paper (WP 16-33) was split into 2 articles: WP 17-13 and this one (WP 17-14).