Penny Stock Ipos

40 Pages Posted: 8 Nov 2005

See all articles by Daniel Bradley

Daniel Bradley

University of South Florida

John Cooney

Texas Tech University - Rawls College of Business

Steven D. Dolvin

Butler University

Bradford D. Jordan

University of Florida; University of Florida - Department of Finance, Insurance and Real Estate

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Date Written: July 15, 2005

Abstract

We examine underpricing, long-run returns, lockup periods, and gross spreads for penny stock IPOs over the 1990-1998 period. We find that penny stock IPOs have higher initial returns than ordinary IPOs, but significantly worse long-run underperformance. We also find that penny stock IPOs have longer lockup periods and larger gross spreads. To explore the effect of potential market manipulation, we examine IPOs led by a group of underwriters that were the subject of SEC enforcement actions and/or other penalties. Penny stock issues led by these banks are particularly underpriced and underperform ordinary IPOs led by other underwriters.

Keywords: penny stock, IPO, manipulation

JEL Classification: G24

Suggested Citation

Bradley, Daniel and Cooney, John W. and Dolvin, Steven D. and Jordan, Bradford D., Penny Stock Ipos (July 15, 2005). Available at SSRN: https://ssrn.com/abstract=840106 or http://dx.doi.org/10.2139/ssrn.840106

Daniel Bradley (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

John W. Cooney

Texas Tech University - Rawls College of Business ( email )

Lubbock, TX 79409
United States
806-834-1536 (Phone)

Steven D. Dolvin

Butler University ( email )

4600 Sunset Avenue
Indianapolis, IN 46208
United States

Bradford D. Jordan

University of Florida ( email )

Gainesville, FL 32611
United States

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

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