Syndicate structure and IPO outcomes: The impact of underwriter roles and syndicate concentration |
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| Institution: | 1. Ivey Business School, Western University, 1255 Western Road, London, ON N6G0N1, Canada;2. Gustavson School of Business, University of Victoria, 3800 Finnerty Road, Victoria, BC V8P5C2, Canada;1. Sabanc? University, Sabanc? Business School, Turkey;2. University of Maryland, Robert H. Smith School of Business, United States of America;3. Koc University, College of Administrative Sciences and Economics, Turkey |
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| Abstract: | We examine how the composition and concentration of the underwriting syndicate affects outcomes in U.S. initial public offerings (IPOs) from 2002 to 2020. Most IPOs now feature “phantom” lead managers who underwrite significantly fewer shares than the lead-left bookrunner. We hypothesize that the phantom lead is the result of bargaining between issuers wanting greater information production and lead-left bookrunners preferring greater control of the IPO. Larger, less concentrated IPO syndicates feature more absolute price adjustments from the filing price during bookbuilding with downward revisions on average, and more analyst following post-IPO. The magnitude of price adjustments is greater when adding active joint leads relative to passive phantom leads. More concentrated IPOs feature higher first-day returns following positive price adjustments. Adding lead managers reduces the likelihood the lead-left will retain that role in follow-on equity offerings. |
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