Russian IPOs Pricing Efficiency

Abstract

The article analyzes the results of IPOs of Russian companies in the period from 1996 till the end of 1st quarter of 2007 as well as the ways of improving the IPO pricing efficiency. Resolving of the task depends on analysis of IPO Underpricing and Partial Adjustment Phenomenon (which is clearly seen on Russian data). IPO pricing efficiency is normally assessed using 2 approaches:1) by comparison the offer price with the price range (the closer to the top of price range the better); 2) by comparison the offer price to the closing price of the 1st trading day (IPO Underpricing). Above mentioned Partial Adjustment Phenomenon shows that the closer the offer price to the top of price range the higher the IPO Underpricing. Persistence of Partial Adjustment Phenomenon on Russian data leads to the conflict between the two approaches to analyzing IPO pricing efficiency. The task of finding the ways of improving the IPO pricing efficiency is equal to the task of mitigation the conflict.