Abstract
This article empirically analyses the initial and aftermarket returns for US-listed Shipping initial public offerings (IPOs). Our main objective is to fulfil the great need for the US Shipping evidence on long-run performance of IPOs. We aim to test the extent to which signalling models explain the reasons for the issuance of IPOs using the long-term price performance approach. We concentrate on a sample of 61 IPOs listed during the period 1987–2007 in four major US Stock Exchanges, computing buy-and-hold abnormal returns (BHARs) and cumulative average returns (CARs). The results show that US-listed Shipping IPOs are underpriced on initial trading day on average by only 4.44 per cent, a figure that indicates an outstanding level of maturity for the shipping sector. In the long run, Shipping IPOs listed in the United States offer 1- , 2- and 3-year holding period returns (BHAR) of 7.50, 7.73 and 3.26 per cent, respectively. The conclusion suggested by those results is that investing in the United States is not a guaranteed investment for long-term Shipping IPOs-oriented investors.
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Notes
Ritter's (1991) criteria are: (1) an offer price of $1.00 per share or more; (2) gross proceeds, measured in terms of 2007 purchasing power, of $1 000 000 or more; (3) the offering involved common stocks only (unit offers are excluded); (4) the company is listed on The CRSP daily AMEX-NYSE-NASDAQ or OTC tapes within 6 months of the offer date; and (5) investment bankers took the company public in 1987–2007.
To select matching firms we followed Ritter's (1991) methodology. Specifically among firms listed in AMEX, New York Stock Exchange, NASDAQ and OTC, their market values were computed on the dates of 31 December 1987, 1997, 2002 and 2007. Within each three-digit SIC Code, these firms were ranked by market value. If a matching firm in the shipping industry was not available, then a firm in another industry was chosen, with preference given to firms in related industries. For companies going public in 2002–2004, the market value of listed firms at the end of 2002 was used. For firms going public in 2005–2007, the market value of listed firms at the end of 2007 was used.
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Acknowledgements
We thank Ken French for providing access to the historical size and book-to-market breakpoints, portfolio returns and factor returns. Ioannis Papadimitriou provided excellent research assistance.
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Merikas, A., Gounopoulos, D. & Karli, C. Market performance of US-listed Shipping IPOs. Marit Econ Logist 12, 36–64 (2010). https://doi.org/10.1057/mel.2009.18
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DOI: https://doi.org/10.1057/mel.2009.18