Penny Stock Ipos

Bradley, Daniel; Cooney, John; Dolvin, Steven D.; Jordan, Bradford D.

doi:10.2139/ssrn.840106

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Penny Stock Ipos

40 Pages Posted: 8 Nov 2005

See all articles by Daniel Bradley

John Cooney

Texas Tech University - Rawls College of Business

Bradford D. Jordan

University of Florida; University of Florida - Department of Finance, Insurance and Real Estate

There are 2 versions of this paper

Date Written: July 15, 2005

Abstract

We examine underpricing, long-run returns, lockup periods, and gross spreads for penny stock IPOs over the 1990-1998 period. We find that penny stock IPOs have higher initial returns than ordinary IPOs, but significantly worse long-run underperformance. We also find that penny stock IPOs have longer lockup periods and larger gross spreads. To explore the effect of potential market manipulation, we examine IPOs led by a group of underwriters that were the subject of SEC enforcement actions and/or other penalties. Penny stock issues led by these banks are particularly underpriced and underperform ordinary IPOs led by other underwriters.

Keywords: penny stock, IPO, manipulation

JEL Classification: G24

Suggested Citation: Suggested Citation

Bradley, Daniel and Cooney, John W. and Dolvin, Steven D. and Jordan, Bradford D., Penny Stock Ipos (July 15, 2005). Available at SSRN: https://ssrn.com/abstract=840106 or http://dx.doi.org/10.2139/ssrn.840106