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ARTICLE · 18 JUNE 2018

IPO Underpricing

Mayer Brown
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In a recent speech, Commissioner Jackson focuses on the traditional IPO 7% spread, which he refers to as a "tax."

United StatesCorporate/Commercial Law
Anna T. Pinedo
Anna T. Pinedo
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In a recent speech, Commissioner Jackson focuses on the traditional IPO 7% spread, which he refers to as a "tax." From time to time, such as in the correspondence between Congressman Issa and then Securities and Exchange Chair Schapiro and in academic literature, questions have been raised regarding the IPO book building process and "IPO underpricing"; however, I don't think an SEC Commissioner has previously taken on this topic. The speech cites to Professor Jay Ritter's work and notes that the Commissioner's staff undertook an effort to look at more recent data, which included data from more than 700 middle market IPOs over a 15-year period beginning in 2001. There is a link to the supplemental research (you may access here). The following chart illustrates the study findings from 2001 to 2016:

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