IPO Underpricing and the share issue price on the NewConnect market

Authors

DOI:

https://doi.org/10.26485/SPE/2022/123/5

Keywords:

IPO, NewConnect, Alternative Trading System, issue price

Abstract

Background: The article deals with companies debuting on NewConnect, an alternative trading system run by the Warsaw Stock Exchange S.A. outside the regulated market. It focuses on the evolution of the issue price of a company’s shares compared to its price at the end of the day of the first quotation.

Research purpose: The aim of the article is to analyze IPO underpricing on the NewConnect market between 2007 and 2020 based on the share issue price on the debut date. The average change in the price of a security was also examined, as well as the number of companies according to the issue price. Attention is also paid to changes in prices in the NewConnect debut following the introduction of regulations regarding the increase in the nominal value of shares to PLN 0.10.

Methods: The literature on the subject was reviewed, and the methods of deduction and observation were used. The source data and legal acts relating to the NewConnect market were analyzed. Statistics on the price change on the company’s debut on NewConnect are also included.

Conclusions: The analysis of 620 companies admitted to trading on the NewConnect market shows that the shares of 60.22% of companies had a higher price at the end of the first trading day in relation to the issue price. The leading companies are debuts of penny companies, i.e., with an issue price below PLN 1. However, before April 1, 2010, the average price increase on the day of the debut was 176.06%. After the introduction of regulations concerning the increase of the nominal value of shares to PLN 0.10, the volatility of the price on the debut day among penny companies decreased, limiting the investment risk on the NewConnect market. Considering the number of companies debuting on NewConnect, entities that issued securities with an issue price above PLN 5 prevail, with the average price increase for these securities being the lowest at an average of 32.83%.

Downloads

Download data is not yet available.

References

Adamska A., Publiczna oferta akcji – perspektywa ładu korporacyjnego, Finanse, Rynki Finansowe, Ubezpieczenia 2017/5 (89)/2, s. 475–484.

Baron D.P., Holmström B., The Investment Banking Contract for New Issues under Asymmetric Information: Delegation and the Incentive Problem, Journal of Finance 1980/35, s. 1115–1138.

Beatty R.P., Ritter J.R., Investment banking, reputation, and the underpricing of initial public offerings, Journal of Financial Economics 1986/15 (1), s. 213–232.

Brennan M.J., Franks J., Underpricing, ownership and control in initial public offerings of equity securities in the UK, Journal of Financial Economics 1997/45 (3), s. 391–413.

Certo S.T., Covin J.G., Daily C.M., Dalton D.R., Wealth and the effects of founder management among IPO-stage new ventures, Strategic Management Journal 2001/22, s. 641–658.

Fijałkowska D., Muszyński M., Pauka M., Zjawisko undepricingu na rynku Newconnect, Zeszyty Naukowe Uniwersytetu Szczecińskiego. Finanse, Rynki Finansowe, Ubezpieczenia 2013/766 (62), s. 267–276.

Gemzik-Salwach A., Perz P., Rynek pierwszych ofert sprzedaży akcji na NewConnect – wybrane zagadnienia, Annales Universitatis Mariae Curie-Skłodowska, sectio H – Oeconomia 2013/47, s. 177–185.

Hadro D., Pauka M., Reakcje cenowe w debiucie na NewConnect. Znaczenie asymetrii informacji, Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu, Wrocław 2018.

Hensler D.A., Litigation Costs and the Underpricing of Initial Public Offerings, Managerial and Decision Economics 1995/16, s. 111–128.

Jewartowski T., Lizińska J., Short- and Long-Term Performance of Polish IPOs, Emerging Markets Finance and Trade 2014/48 (2), s. 59–75.

Kaminski K., Zaremba A., IPOs – not so much Money on the Table: The Cost Compensation Hypothesis, Argumenta Oeconomica 2011/1 (26), s. 149–175.

Kavalenka Y., Determinants of IPO Underpricing on the Warsaw Stock Exchange, Finanse, Rynki Finansowe, Ubezpieczenia 2018/1 (91), s. 257–267; https://doi.org/10.18276/frfu.2018.91-21

Ljungqvist A., IPO Underpricing, w: B.E. Eckbo (red.), Handbook of Corporate Finance: Empirical Corporate Finance, vol. 1, North-Holland, New Hampshire, USA 2007, s. 375–422.

Ljungqvist A., Nanda V., Singh R., Hot Markets, Investor Sentiment, and IPO Pricing, Journal of Business 2006/79, s. 1667–1702.

Loughran T., Ritter J.R., Why don’t issuers get upset about leaving money on the table in IPOs?, Review of Financial Studies 2002/15 (2), s. 413–444.

Loughran T., Ritter J.R., Why Has IPO Underpricing Changed Over Time?, Financial Management 2003/33, s. 5–37.

Loughran T., Ritter J.R., Rydqvist K., Initial public offerings: international insights, Pacific-Basin Finance Journal 1994/2 (2–3), s. 165–199.

Lowry M., Why does IPO volume fluctuate so much?, Journal of Financial Economics 2003/67 (1), s. 3–40.

Lyn E., Zychowicz E., The Performance of New Equity Offerings in Hungary and Poland, Global Finance Journal 2003/14, s. 181–195.

Mamcarz K., Niedoszacowanie ceny emisyjnej akcji w pierwszej ofercie publicznej jako instrument komunikacji spółek akcyjnych z inwestorami, Annales Universitatis Mariae Curie-Skłodowska – Polonia Sectio H 2010/XLV/1; XLIV/2, s. 649–661.

Mamcarz K., Niedoszacowanie ceny emisyjnej akcji w pierwszej ofercie publicznej jako instrument sygnalizacji, Annales Universitatis Mariae Curie-Skłodowska – Polonia Sectio H 2011/XLV/1, s. 151–160.

Markiewicz M., Zygmanowski P., Znaczenie rynku NewConnect jako miejsca przeprowadzenia oferty pierwotnej, Ruch Prawniczy, Ekonomiczny i Socjologiczny 2013/2, Poznań, s. 167–186.

Mościbrodzka M., Zachowania i anomalie na rynku NewConnect, Prace Naukowe Wydziału Prawa, Administracji i Ekonomii Uniwersytetu Wrocławskiego, Wrocław 2020, s. 47–70; https://doi.org/10.34616/23.21.005

Nachman D.C., Noe T.H., Optimal design of securities under asymmetric information, Review of Financial Studies 1994/7 (1), s. 1–44.

Pagano M., Panetta F., Zingales L., Why do companies go public? An empirical analysis, Journal of Finance 1998/53 (1), s. 27–64.

Panfil M., Analiza porównawcza Newconnect i innych europejskich rynków alternatywnego systemu obrotu akcjami, Zeszyty Naukowe Uniwersytetu Szczecińskiego 2013/768, s. 357.

Pastusiak R., Przedsiębiorstwo na rynku kapitałowym: operacje giełdowe rynku publicznego i niepublicznego, CeDeWu, Warszawa 2007, s. 375.

Płotnicki M., Szyszka A., IPO market timing. The evidence of the disposition effect among corporate managers, Global Finance Journal 2014/25, s. 48–55.

Pomykalski P., Filipiak P., Factors Influencing IPO Underpricing in Poland, Acta Universitatis Lodziensis. Folia Oeconomica 2020/4/349, s. 7–21.

Ritter J.R., The “Hot Issue” Market of 1980, Journal of Business 1984/57 (2), s. 215–240.

Ritter J.R., Welch I., A Review of IPO Activity, Pricing and Allocations, The Journal of Finance 2002/57 (4), s. 1795–1828.

Rock K., Why new issues are underpriced, Journal of Financial Economics 1986/15, s. 187–212.

Sieradzki R., Does it pay to invest in IPOs? Evidence from the Warsaw Stock Exchange, NBP Working Papers 2013/139, s. 1–37.

Siwek P., Praktyka pierwszych ofert publicznych w Polsce, CeDeWu, Warszawa 2005.

Vismara S., Paleari S., Ritter J.R., Europe’s Second Markets for Small Companies, European Financial Management 2012/18 (3), s. 352–388.

Wołoszyn A., Efekt niedowartościowania akcji w dniu debiutu na rynku kapitałowym w Polsce, praca doktorska, Szczecin 2013.

Zarzecki D., Wołoszyn A., The Impact of Value and Growth Companieson IPO Underpricing on the Polish; https://doi.org/10.18276/frfu.2016.4.82/2-28

Zasępa P., Wpływ ceny nominalnej akcji na niedowartościowanie pierwszej oferty publicznej na rynku NewConnect, Prace Naukowe Akademii im. Jana Długosza w Częstochowie. Pragmatates Oikonomias 2013/7, s. 285–293.

Zingales L., Insider Ownership and the Decision to go Public, Review of Economic Studies 1995/62, s. 425–448.

Regulamin Alternatywnego Systemu Obrotu, w brzmieniu przyjętym Uchwałą Nr 147/2007 Zarządu Giełdy z dnia 1 marca 2007 r., z późn. zm.

Uchwała Nr 733/2009 Zarządu Giełdy Papierów Wartościowych w Warszawie S.A z dnia 18 grudnia 2009 r. w sprawie zmiany Regulaminu Alternatywnego Systemu Obrotu.

Uchwała Nr 451/2013 Zarządu Giełdy Papierów Wartościowych w Warszawie S.A z dnia 29 kwietnia 2013 r. w sprawie zmiany Regulaminu Alternatywnego Systemu Obrotu.

Roczniki giełdowe GPW, https://www.gpw.pl; stan na 1.01.2021 r.

Statystyki NewConnet, https://newconnect.pl; stan na 1.01.2021 r.

Downloads

Published

2022-07-15

How to Cite

Frydrych, S. (2022). IPO Underpricing and the share issue price on the NewConnect market. Studia Prawno-Ekonomiczne, 123, 77–92. https://doi.org/10.26485/SPE/2022/123/5

Issue

Section

ARTICLES - THE ECONOMICS