MBA & MM Theses

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Subject: search.filters.subject.Johannesburg Securities ExchangeSubject: search.filters.subject.Initial public offerings

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    Does the underpricing phenomenon exist for IPO’s on the JSE?
    (2014-02-17) Gouws, Ian Louis
    It has been widely documented that many stock exchanges experience significant first day returns for listings stocks. In this current research it was undertaken to determine the level of underpricing on the JSE and identify factors that might significantly influence the underpricing. Offer price, share price movement, market movement as well as factors on, listing board, company age, listing underwriter/sponsor, listing size and offer price was collected for 84 companies listing in the period between June 2006 and June 2012. The first day returns, long run buy hold abnormal return (BHAR), pre-listing market movement was calculated. The relationship between first day returns and the factors were analysed by grouping. To establishing their ability to predict the first day returns a normal linear regression model was utilized. One significant relationship was established in the prediction of initial returns. The listing size was negatively related to underpricing, meaning that the bigger the company the more likely it is that the initial return would be smaller. As some authors established listing size a measure of risk it is inferred that risk associated with listing size plays a significant role in the initial return of listing shares. The second significant finding is that the economic sectors have statistically different levels of underpricing meaning listing a share in some sectors would result in different levels of initial returns. Thirdly, the offer price has significant differences in terms of initial return, in that listings with smaller offer prices underprice more than listings with bigger offer prices. The Long run performance for listings shares on the JSE has been seen to be poor with aftermarket share pricing declining from second month onwards for three years after listing.
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    Aftermarket price performance of initial public offerings on the JSA: 1980-1998
    (2011-10-14) M’kombe, Chamu Mark
    It is generally accepted that investors who invest in initial public offering shares on the Johannesburg Stock Exchange (JSE) expect to get returns that are in line with the risk to which they expose their investments. It would be beneficial for these investors, particularly those who invest for long periods of time, to know what returns their investments are likely to yield. It would equally be advantageous to managers of companies that intend to list on the JSE and to their advisors, to understand the critical factors that influence the performance of initial public offerings in the medium and long-term periods. This research intended to answer three main questions regarding the performance of initial public offerings after listing. These questions were:- i) Do shares that list on the JSE yield risk-adjusted abnormal returns? ii) Are the returns received after investing in initial public offerings on the JSE dependent on the holding period of the investment? iii) Do certain characteristics of the initial public offering process influence the returns after listing? The period of study was 1980 to 1998. Three risk-adjusted benchmarks were used to determine whether the shares that listed on the JSE yielded risk adjusted positive returns. These benchmarks were the CAPM model, the book-to-market reference portfolios and the market capitalisation reference portfolios. All three benchmarks indicated that on average, the returns yielded by the initial public offering shares were less than the risk adjusted expected returns. Furthermore, it was shown that the difference between the expected returns and the actual returns increased with the holding period of the investment. The differences were statistically significant. The research also found that certain characteristics of the initial public offering process (e.g. the listing price and the capital raised) could have influenced the returns