Manipulated IPOs. The Role of the Syndicate Structure

      Аннотация: I examine the syndicate structure of 460 IPOs issued between 1998 and 2000 of which 285 have been sued for laddering. Laddering is a deceitful practice in which the underwriting investment bank allocates primary shares at the offer price to initial investors conditional on these investors committing to purchase additional shares in the aftermarket on pre-determined dates. Strong evidence is found that laddered IPOs have a smaller and less concentrated syndicate structure compared to non-manipulated IPOs. This finding provides evidence of a closer profit sharing and complicit collusion between syndicate members. Furthermore, it becomes obvious that laddered IPOs have on average significantly more reputable book manager and co-manager compared to non-sued IPOs. An additional finding is that geographical proximity of underwriter does not seem to be an important criterion for the syndicate formation in order to enforce laddering agreements. By taking a closer look whether an issuer chooses a new underwriter for the first follow-on offering, it can be concluded that “laddering” is not a significant criterion influencing the switching decision of issuers. This finding either implies that the issuer has been unaware of the laddering scheme or has implicitly profited from price stabilization until the secondary offering.

Ключевые слова: IPO, Laddering