Is There Information Production in Auctioned IPOs with Uniform Price?

Abstract

Using a large proprietary IPO bidding dataset from China, we examine whether there is information production in auctioned IPOs in which uniform price applies and the underwriter has no allocation discretion. Our IPO-level and IPO-bidder-level analyses suggest that institutions bid in IPO auctions in a way broadly consistent with the information production hypothesis that posits bidders possess and reveal information in IPO pricing. The results are robust to controlling for a bidder’s observed prior underwriting relationship and unobserved time-invariant relationship with the underwriter. Our findings are germane to the IPO auctions pioneered by WR Hambrecht in the U.S.

Keywords: IPO, uniform price, allocation discretion, auction, information production

JEL Classification: G32