IPO underpricing in the second and main markets: The case of the London Stock Exchange

Abstract

This study contributes to a broader knowledge of initial public offerings (IPOs) underpricing in second and main markets. We analyse the particular case of the London Stock Exchange. In the second market, we distinguish between those companies that do not meet the main market listing requirements and those companies that, even though they meet the main market listing requirements, decide to float on the second market. The results show that there is less underpricing for firms that float on the main market than for companies listed on the second market regardless of whether those companies meet the main market listing requirements. Moreover, behind the underpricing, we find several variables related to firm and/or offering characteristics and market information and observe different behaviours in the explanatory variables for underpricing depending on the group to which the company belongs.