retail ipo in emerging markets xi international academic conference on economic and social...
Post on 28-Dec-2015
215 Views
Preview:
TRANSCRIPT
Retail IPO in Emerging MarketsRetail IPO in Emerging Markets
XI International Academic Conference on Economic and Social Development
Dmitry KokorevDmitry Kokorev
www.cfcenter.ruhttp://en.cfcenter.ru/
www.cfjournal.ru
Basic Research Programme of the Higher School of Economics in 2010 1
IPO - issuing shares to the general public for the first time, with the expectation that a liquid market will develop.
Main issues:
1) Underpricing (the price change measured from the offering price to the market price on the first trading day, 16% in US Market) [Ritter, Ibbotson]
2) Long-Run performance (poor stock price performance of IPOs in the long run, -20% 3-years abnormal return in US Market) [Ritter,Loughran]
3) Market timing (cycles existence in both the volume and the average initial returns of IPOs) [McDonald, Titman, Zingales]
2
IPO: definition and main issues
Type of owner (Private vs State Owned) [Perotti, Megginson]
Type of investor (Retail vs Institutional) [Aggarwal,
Ljungqvist, Wilhelm]
Country [Ritter, Loughran]
Other factors (IPO size, number of shares offered,
company’s age, operational performance before offering, etc)
3
Key factors, which affect IPO return
IPO in emerging markets: database
Basic criteria
Company form one of emerging markets
Time period: 2003-2010
Shares – actively traded
Market cap > $30 Mln
4
Data base
1911 offerings
15 emerging markets
Source: Bloomberg, Factiva, VanDijk
IPO in emerging markets: country differences
China [Guo, McGuinness]
A – shares vs Other shares
Government interventionBefore 2001 – planning system of IPO
Price regulation
System of non-tradable securities
High level of demand from retail investors
Near 2300 companies, $1 700 bln.
5
India [Ghosh]
Most of companies – private
22 stock-exchanges
High level of demand from local retail investors and NRI
More than 6000 companies, $700 bln.
Brazil [Cigerza]
Developed rules of trading
Almost none of government intervention
Foreign and retail investors actively participate
Most of companies trade only preferred shares (family owned)
Near 400 companies, $600 bln.
Russia
A lot of Open Joint-Stock companies through Privatization, but most of them – non-tradable
Low market liquidity and level of activity of retail investors
Near 200 companies, $670 bln.
IPO in emerging markets
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Underpricing Average 1-Year return Average 2-Year return Average 3-Year return
Emerging Markets Emerging Markets (w/out A-shares) USA [Ritter]
Emerging markets vs USA
*Average Long-Run return – buy-and-hold return, adjusted by country index (BHAR)
IPO in emerging markets: country differences
CountryNumber of
IPOsAgregate Gross Proceeds, $ mln.
Average IPO size
UnderpicingAverage 1-Year return
Average 2-Year return
Average 3-Year return
BRAZIL 102 36 915 362 4% -13% -18% -13%HONG KONG 193 38 092 197 13% 2% 2% -10%SINGAPORE 127 12 805 101 13% 4% -9% 3%
MEXICO 22 95 098 4 323 9% -8% -4% -19%RUSSIA 32 36 747 1 148 3% -4% -9% 19%TURKEY 30 8 525 284 -26% -22% -18% -25%
GROUP 1 506 228 182 451 8% -3% -7% -7%
CHILE 11 26 811 2 437 20% -11% -14% -3%CHINA 384 169 707 442 21% -11% -18% -28%EGYPT 8 2 809 351 31% -18% -20% -29%
GROUP 2 403 199 328 495 21% -11% -18% -27%
INDIA 221 33 179 150 36% 4% 13% 41%THAILAND 104 6 349 61 12% 9% 3% 10%POLAND 71 6 969 98 20% 18% 44% 47%
ROMANIA 3 180 60 20% 24% 1% -12%
GROUP 3 399 46 677 117 27% 8% 16% 33%
CHINA(A-shares) 601 83 159 138 89% -19% -10% -24%CZECH 2 687 344 240% -40% -22% -13%
Retail IPO: data and methodology
8
Model for underpricing
OwnerLnVolumeOverSubOptionretShareR 54321
yAbnormalDaOwnerLnVolumeOverSubretShareR 65431
DATA : 2003-2008 cross-sectionAdditional data about:
OversubscriptionShare of retail investors in offeringOwner before IPO
150 companies from 6 countries
Pilot Study
Model for long-run return
Retail IPO: descriptive statistic
9
Pilot Study
18%
-2% -3% -1%
20%
-18%
-34%
-53%
12,00%8,70% 10,70%
19,70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Underpricing Average 1-Year return Average 2-Year return Average 3-Year return
Emerging Markets Retail IPO PIPO
Effect of owner
10
Retail IPO: privatization status
Only 18 companies11 – China3 – Russia2 – Poland1 – India1 - Egypt
Pilot Study
Retail IPO: regression analysis
11
Pilot Study
*** - 1% significance level** - 5% significance level* - 10% significance level
Underpricing 1-Year return 2-Year return 3-Year return
Const .238*** -.662 -.061 .035
RetShare .0922** -.391** -.425* -.327*
Option .0227
OverSub .007* .003 -.001 -.004
LnVolume -.0465** -.064** -.003** -.080**
Owner .0336* .324** .414** 1.32
AbnormalDay -.271** -.518 -.341
Observations 150 148 90 57
R2 0,23 0,152 0,114 0,122
Results
In average, investor earns more from investing in emerging
market IPO
Country factor is crucial
Retail investors are generally lose on average in LR
Privatization Retail IPO generally gives more return (SR and LR)
12
Thank you for your attention! 13
IPO in Emerging Markets: descriptive statistic
11
)1()1(t
jtt
it CRERBHAR
Year Number of IPOsAgregate Gross Proceeds, $ mln.
Average IPO size UnderpicingAverage Half-Year return
Average 1-Year return
Average 2-Year return
Average 3-Year return
2003 164 17 051 104 43% -4% -8% -20% -24%2004 280 31 065 111 28% -4% 0% 6% 18%2005 215 66 917 311 46% 13% 21% 45% 7%2006 283 99 810 353 35% -11% -22% -11% -23%2007 439 141 915 323 66% -17% -19% -18% -14%
2008 Н1 135 116 849 866 48% 1% 10% 0% n/a2008 Н2 51 4 771 94 33% 4% -4% n/a n/a2009 Н1 24 5 452 227 29% -9% 35% n/a n/a2009 Н2 207 55 102 266 39% -1% n/a n/a n/a
2010 113 19 101 169 25% n/a n/a n/a n/a
Retail IPO: descriptive statistic
Number of IPOs
ReturnNumber of
IPOsReturn
Number of IPOs
ReturnNumber of
IPOsReturn
Number of IPOs
Return
China 111 19% 111 -12% 110 -24% 65 -40% 35 -83%Egypt 1 79% 1 -26% 1 -12% 1 -67%India 2 88% 2 -23% 1 -6% 1 76%
Poland 12 13% 12 10% 12 -1% 2 -3% 1 30%Russia 3 1% 3 -12% 3 -34%
Singapore 21 34% 21 -23% 21 -27% 21 -52% 21 -43%Total Retail IPO 150 20% 150 -10% 148 -18% 90 -34% 57 -53%
Total all offerings (w/out China A-shares) 1 310 18% 1 180 -3% 1 140 -2% 1 045 -3% 748 -1%
Average 2-Year return Average 3-Year returnCountry
Underpicing Average Half-Year return Average 1-Year return
top related