Initial Public Offering Pricing in Tehran Stock Exchange
Subject Areas : Financial Knowledge of Securities Analysis
Keywords: Initial Public offering (IPO), After Market Price (AP), Mispricing (MP), Investor Reaction, stock exchange,
Abstract :
The present research," initial public offering (IPO) pricing ", is written in order to increase the efficiency of stock exchange. This research aims to help the qualitative and quantitative development of initial public offering methods of companies accepted by Tehran stock exchange in order to evolve applied financial knowledge in capital market. Methodology is based on surveying, correlation and causal-comparative method. The statistical universe of the research includes companies accepted by Tehran stock exchange between 2001 and 2008.The statistical universe includes 120 companies from 27 industries which were accepted by stock exchange. The research findings indicate that: 1. After two phases, the IPO price will reach to After Market Price 2. In comparison with IPO price, After Market Price (AP) difference is more than zero. 3. The IPO in Tehran stock exchange is underpricing. 4. Among investor sensitivity variables(company magnitude , stock transaction rate in the first offering , number of buyers in the first offering , inflation rate , P/E ratio and currents ratios , debt ratio , return on owners equity and net growth value of company), there is only meaningful relation between P/E and mispricing. 5. Investor shows over reaction from the first day of IPO until the price is stabilized in secondary market (AP). 6.The analysis of possible variables related to After Market Price(AP) indicates that among the research variables(inflation rate, industry, P/E, company magnitude, current ratio, debt ratio, return on owners equity , fixed assets turnover, net growth value and EPS during issue) ,three variables influenced After Market Price(AP) which included: inflation rate, P/E rate and debt ratio. Since investment is important in stock exchange and pricing is critical in investors absorption and issuers success; this research deals with initial public offering method and it's affecting factors so that it provides good insights for investors.