Unveiling differential patterns in IPO and SEO underpricing: a comparative analysis of high-quality and low-quality firms

This paper uses cross-country SEO data from 2001 to 2021 to show that the underpricing in each future SEO round reduces, and this happens at a faster rate for high-quality firms. We posit that, especially, high-quality firms, tend to underprice their IPOs with an expectation to recoup the lost proceeds in future SEO rounds. We also find that various firm-level factors, such as the time elapsed since the IPO, IPO-underpricing, ex-ante uncertainty, and relative offer-size of the SEO, affect this association between SEO rounds and SEO-underpricing. Our results are robust and remain unaltered across a series of robustness tests.