THE MARKET'S PRICING OF DEBT IPOs
Based on the authors' recent study published in the "Journal of Financial Economics", this article summarizes new evidence on the first-day and aftermarket price performance of a firm's first public offer of bonds after its equity IPO. Unlike equity IPOs, such bond IPOs are not underpriced "on average." However, bonds that are more equity-like (junk bonds) are underpriced at the initial offer whereas high-grade debt is actually overpriced. This finding supports the view that riskier debt issues have a larger equity component and, as a consequence, a higher degree of information asymmetry. 1999 Morgan Stanley.
Year of publication: |
1999
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Authors: | Datta, Sudip ; Iskandar-Datta, Mai ; Patel, Ajay |
Published in: |
Journal of Applied Corporate Finance. - Morgan Stanley, ISSN 1078-1196. - Vol. 12.1999, 1, p. 86-91
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Publisher: |
Morgan Stanley |
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