Strategic IPO underpricing , information momentum , and lockup expiration selling

@inproceedings{Aggarwala2002StrategicIU,
  title={Strategic IPO underpricing , information momentum , and lockup expiration selling},
  author={Rajesh K. Aggarwala and Laurie Krigmanb and Kent L. Womacka},
  year={2002}
}
  • Rajesh K. Aggarwala, Laurie Krigmanb, Kent L. Womacka
  • Published 2002
Managers usually do not sell any of their own shares in an initial public offering but instead wait until the end of the lockup period. We develop a model in which managers strategically underprice IPOs to maximize personal wealth from selling shares at lockup expiration. Firstday underpricing generates information momentum by attracting attention to the stock and thereby shifting the demand curve for the stock outwards. This allows managers to sell shares at the lockup expiration at prices… CONTINUE READING
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