SEC Workload, IPO Filing Reviews, and IPO Pricing

We analyze the interaction between high workload of the Securities and Exchange Commission (SEC) staff and the information production stimulated by their review process of initial public offerings (IPOs). We find that high workload is associated with more generic comments in the first letter, with fewer overall comments for later letters, and that the SEC answers quicker while being busy. Using a measure of initial SEC concerns based on comment counts, we find, for instance, a positive relation with absolute price revisions from the initial estimate to the final price. If we additionally consider an interaction with high workload, such effects become weaker for high workload IPOs and stronger for non-high workload IPOs. Partly but not entirely, generic comments mediate this effect. Consistent with the view that our findings indicate fewer SEC induced information production under high workload, we find that underpricing is significantly larger for high workload IPOs. This is in line with theories, where investors are compensated for their information production via bookbuilding