The Informational Content of Initial Public Offerings

Ian Gale, Joseph Stiglitz

NBER Working Paper No. 3259
Issued in February 1990
NBER Program(s):   ME

The ability of capital markets to distinguish firms of different value by the size of their initial equity offerings is attenuated when insiders can sell equity more than once. A model is developed in which there is price risk from holding equity between periods. When the uncertainty is small. there must be pooling in the first period. When uncertainty is large. the pooling equilibria dominate the separating equilibrium.

(103 K)

(83 K)

Published:

• Published as "The Information Content of Initial Public Offerings", JF, Vol. 44, no. 2 (1989): 469-478. ,
• Gale, Ian L & Stiglitz, Joseph E, 1989. " The Informational Content of Initial Public Offerings," Journal of Finance, American Finance Association, vol. 44(2), pages 469-77, June.

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