IPO Pricing,Block Sales,and Long‐Term Performance

Block sales following IPOs are related to the IPOs' value relative to an estimate of intrinsic value, opening‐trade return, and IPO size. Overvalued IPOs experience more block sales than undervalued IPOs. IPOs with high block sales outperform IPOs with low block sales from 20 days after IPO through lockup expiration; however, IPOs with high block sales underperform IPOs with low block sales from lockup expiration through the third year after the IPO. The results indicate that block traders are advantaged relative to other traders; whether the advantage is based on superior information or superior valuation capabilities is unknown.