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Working Paper

Dotcom Extreme Underpricing

We conjecture that the Dotcom abnormal underpricing resulted from the emergence a large cohort of firms racing for market leadership/survivorship. Fundamentals pricing at the IPO was part of their strategy. Consistent with our conjecture, firms’ strategic goals and characteristics fully explain the abnormal underpricing. Contrary to alternatives explanations, underpricing was not associated with top underwriting; there was no deterioration of issuers’ quality; and top underwriters and analysts became more selective.

Note: This paper is one of two originally posted as WP 16-33 in December 2016 and titled “The Dotcom Bubble and Underpricing: Conjectures and Evidence.”
The original paper (WP 16-33) was split into 2 articles: WP 17-13 and this one (WP 17-14).

Suggested Citation

Carvalho, Antonio Gledson de, Roberto B. Pinheiro, and Joelson Oliveira Sampaio. 2017. “Dotcom Extreme Underpricing.” Federal Reserve Bank of Cleveland, Working Paper No. 17-14.