In some countries, it is common that initial public offerings (IPOs) are preceded by forward ("when-issued") trading of the shares; in the US, such trading is prohibited. We analyze the effect of when-issued trading on the pricing and allocation of IPO shares. We demonstrate that the optimal...

We explain and provide evidence for effects of leverage on pricing. Our model identifies two effects that either counteract or reinforce each other, depending on the debt maturity structure: (i) firms set higher prices (underinvest in market share) if they have more debt, and (ii) firms engage...

This paper examines the German IPO pricing process which combines bookbuilding with a liquid pre-IPO when-issued market. We find no partial adjustment phenomenon, as has been documented for U.S. IPOs. We thus find no evidence that bookbuilding provides information for IPO pricing, beyond the...

We develop a model that allows for the coexistence of bookbuilding and when-issued trading. We show that, due to interactions between these two processes, allowing for when-issued trading is for the most part beneficial for issuers. When-issued trading may interfere with information gathering...