@article {Garfinkle50, author = {Norton Garfinkle and Burton G. Malkiel and Costin Bontas}, title = {Effect of Underpricing and Lock-Up Provisions in IPOs}, volume = {28}, number = {3}, pages = {50--58}, year = {2002}, doi = {10.3905/jpm.2002.319842}, publisher = {Institutional Investor Journals Umbrella}, abstract = {This article examines two issues regarding initial equity public offerings (IPOs) of 775 firms that came to market between July 1, 1997, and December 31, 1999. First, a study of the underpricing of new issues indicates that first{\textendash}day excess returns are greater for venture{\textendash}backed IPOs, high{\textendash}tech firms, and firms underwritten by top{\textendash}rung investment bankers, and in months following high previous{\textendash}month Nasdaq returns. Second, the authors look at the longer{\textendash}run performance of IPOs and the effect of the so{\textendash}called lock{\textendash}up provision, which restricts initial founders and owners of the IPO from selling their shares for a period of time. They find a statistically significant increase in trading volume on the day following the unlock date. Prices begin to fall, however, prior to the end of the lock{\textendash}up period as the market anticipates the selling that is likely to follow. There is a substantial negative excess return for shareholders who buy new issues in the open market immediately after the IPO.}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/28/3/50}, eprint = {https://jpm.pm-research.com/content/28/3/50.full.pdf}, journal = {The Journal of Portfolio Management} }