Underpricing in the Cryptocurrency World: Evidence from Initial Coin Offerings
Thomas Heine Felix, Henk von Eije, (2019) 'Underpricing in the Cryptocurrency World: Evidence from Initial Coin Offerings', Managerial Finance, pp. 563-578.
28 Pages Posted: 2 Feb 2021
Date Written: November 9, 2018
We analyze underpricing in listed Initial Coin Offerings (ICOs) by using a sample of 247 ICOs from September 2015 till January 2018. The results show an average level of underpricing of ICOs of 123% in the USA and 97% in the other countries. The results for the USA ICOs are significantly higher than for USA IPOs on average, and also significantly higher than USA IPOs at the beginning of the dot.com bubble. We also study the determinants of ICO underpricing. We use proxies based on asymmetric information from the IPO literature as well as ICO related variables. First-day trading volume and a good sentiment on the ICO market go together with more ICO underpricing. Moreover, hot markets make first day investors to benefit less. Finally, companies that use a large issue size or a pre-ICO (a sale of cryptocurrencies before the ICO) leave less money on the table.
Keywords: Initial Coin Offerings, ICOs, IPOs, Underpricing, Hot issue market, issue size, Pre-ICO, Cryptocurrencies, Tokens, Bitcoin, Blockchain
JEL Classification: G11, G14, G39, G41
Suggested Citation: Suggested Citation