Edited by Mario Levis and Silvio Vismara
Chapter 10: The allotment of IPO shares: placing strategies between retail versus institutional investors
Underwriters hold a number of options in the placing of initial public offering (IPO) shares. They may choose how to partition the offering between retail investors and institutional investors. They may allot the shares through auctions (with or without price discrimination), lotteries, or discretionarily. They can set the price before or after the offering. They may increase the size of the placing (green-shoe option) or decrease it in case of under subscription. They can also change the allocation scheme with respect to what is reported in the IPO prospectus (claw-back option).In this chapter we review the literature related to IPO share allocation, with a particular focus on how allocation and pricing strategies interact. We also report some illustrative empirical evidence from the Italian IPO market.
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