Post IPO Withdrawal Outcomes

Abstract

While existing research shows that a large number of IPOs are withdrawn from registration, little is known regarding the fates of those firms. This study documents capital market activities and corporate outcomes for 588 withdrawn IPOs between 1999 and 2004. We find that 13% of withdrawing issuers return for a successful IPO, 36% are able to raise capital privately and 42% either merge or are acquired with 11% filing for bankruptcy. While the implied valuation from post-withdrawal mergers/acquisitions and returning IPOs are similar to valuations implied in the initial withdrawn filing, implied valuations from private placements are significantly discounted. The ex-ante probabilities of post withdrawal outcomes and post withdrawal valuations are found to have significant effects on the choice to withdraw an IPO.

Keywords: Initial public offerings, withdrawal, filing, asymmetric information, mergers, bankruptcy

JEL Classification: G24, G32, C22