Initial public offerings in Singapore
This study has documented 2 aspects of IPO - its underpricing phenomenon and longrun performance. It has been a well-known fact that investors are able to reap substantial profits due to capital appreciation if they are successful in their subscription for new issues. Throughout the 10 years span...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Final Year Project (FYP) |
| Language: | English |
| Published: |
2015
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| Subjects: | |
| Online Access: | http://hdl.handle.net/10356/63923 |
| _version_ | 1811690016945995776 |
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| author | Chow, Chin Wei Lim, Mei Ling Neo, Keng Hup |
| author2 | Tan Kok Hui |
| author_facet | Tan Kok Hui Chow, Chin Wei Lim, Mei Ling Neo, Keng Hup |
| author_sort | Chow, Chin Wei |
| collection | NTU |
| description | This study has documented 2 aspects of IPO - its underpricing phenomenon and longrun
performance. It has been a well-known fact that investors are able to reap
substantial profits due to capital appreciation if they are successful in their subscription
for new issues. Throughout the 10 years spanning from 1983 to 1993, we have seen 88
IPOs - 55 from the Mainboard and 33 from SESDAQ. Almost all the new issues were
heavily subscribed, such as L&M Group Investments which was oversubscribed by a
staggering 248 times when it went public in December 1983 . The share produced an
impressive 190 per cent premium after its first trading day in the stock market.
We have shown in our study that it is such so-called "guaranteed immediate profit" that
drives the investors to subscribe heavily to any IPO. They perceive that all IPOs are
underpriced, that is, they periodically over-estimate the growth opportunities of IPOs.
Market sentiment plays a significant role in creating this systematic over-estimation.
'Bull issues' perform consistently and significantly better than bear issues. Also, IPOs with
smaller issue sizes produce higher premiums, probably due to the likelihood that demand
easily exceeds supply as a result of fewer shares available.
Our study shows that there is substantial a difference in the long-run performance for IPOs
listed in the Mainboard and SESDAQ. We have been keeping track of the month end
closing price of each IPO for a period of 24 months. Our empirical findings indicated that
the IPOs listed in the Mainboard have consistently underperformed the market whereas
that in the SESDAQ have outperformed the market for the first 23 months before
registering a negative return. The result, especially that in the Mainboard, is consistent with an IPO market in which
investors are periodically over-optimistic about the earning potential of a company seeking
to be listed. That is to say, company go public when investors are irrationally overoptimistic
about the future potential of the market. This is another indicator that market
sentiment does play an important role. |
| first_indexed | 2024-10-01T05:57:18Z |
| format | Final Year Project (FYP) |
| id | ntu-10356/63923 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T05:57:18Z |
| publishDate | 2015 |
| record_format | dspace |
| spelling | ntu-10356/639232023-05-19T03:30:05Z Initial public offerings in Singapore Chow, Chin Wei Lim, Mei Ling Neo, Keng Hup Tan Kok Hui Nanyang Business School DRNTU::Business::Finance This study has documented 2 aspects of IPO - its underpricing phenomenon and longrun performance. It has been a well-known fact that investors are able to reap substantial profits due to capital appreciation if they are successful in their subscription for new issues. Throughout the 10 years spanning from 1983 to 1993, we have seen 88 IPOs - 55 from the Mainboard and 33 from SESDAQ. Almost all the new issues were heavily subscribed, such as L&M Group Investments which was oversubscribed by a staggering 248 times when it went public in December 1983 . The share produced an impressive 190 per cent premium after its first trading day in the stock market. We have shown in our study that it is such so-called "guaranteed immediate profit" that drives the investors to subscribe heavily to any IPO. They perceive that all IPOs are underpriced, that is, they periodically over-estimate the growth opportunities of IPOs. Market sentiment plays a significant role in creating this systematic over-estimation. 'Bull issues' perform consistently and significantly better than bear issues. Also, IPOs with smaller issue sizes produce higher premiums, probably due to the likelihood that demand easily exceeds supply as a result of fewer shares available. Our study shows that there is substantial a difference in the long-run performance for IPOs listed in the Mainboard and SESDAQ. We have been keeping track of the month end closing price of each IPO for a period of 24 months. Our empirical findings indicated that the IPOs listed in the Mainboard have consistently underperformed the market whereas that in the SESDAQ have outperformed the market for the first 23 months before registering a negative return. The result, especially that in the Mainboard, is consistent with an IPO market in which investors are periodically over-optimistic about the earning potential of a company seeking to be listed. That is to say, company go public when investors are irrationally overoptimistic about the future potential of the market. This is another indicator that market sentiment does play an important role. ACCOUNTANCY 2015-05-20T05:45:56Z 2015-05-20T05:45:56Z 1994 1994 Final Year Project (FYP) http://hdl.handle.net/10356/63923 en Nanyang Technological University 149 p. application/pdf |
| spellingShingle | DRNTU::Business::Finance Chow, Chin Wei Lim, Mei Ling Neo, Keng Hup Initial public offerings in Singapore |
| title | Initial public offerings in Singapore |
| title_full | Initial public offerings in Singapore |
| title_fullStr | Initial public offerings in Singapore |
| title_full_unstemmed | Initial public offerings in Singapore |
| title_short | Initial public offerings in Singapore |
| title_sort | initial public offerings in singapore |
| topic | DRNTU::Business::Finance |
| url | http://hdl.handle.net/10356/63923 |
| work_keys_str_mv | AT chowchinwei initialpublicofferingsinsingapore AT limmeiling initialpublicofferingsinsingapore AT neokenghup initialpublicofferingsinsingapore |