The selling and seasoning of investment company offerings

This article investigates the initial and subsequent pricing of Closed-End Investment Company (CEIC) shares offered to the public from 1986 through 1987. Unlike other equities, these showed no abnormal price appreciation at the offering; however, the new CEICs experience significant price declines in the 20 weeks following the offering. The evaporation of the initial premium begins approximately four weeks after the offering date, a lag that coincides with the period of time during which underwriters may cease supporting share prices in the secondary market.The authors thank John D. Jackson, Sam Peltzman, and two anonymous reviewers for their helpful comments.