As you can see, Multilink Technology has been an impressive performer to date; however, several other IPOs, like General Maritime and Fmc Technologies, have not experienced such good fortune. Look at the ticker symbol REVU (for Princeton Review, provider of the ACT, SAT, and GMAT study courses). The performance to date has not been good. What do you suppose that says about students studying (or maybe not studying) for college?

and the amount of underpricing was actually very small or even negative for much of that time. Underpricing in the 1980s ran about 6.9 percent. Finally, for 1990-99, IPOs were underpriced by 20.9 percent on average.

From Figure 16.3, it is apparent that the number of IPOs is also highly variable through time. Further, there are pronounced cycles in both the degree of underpricing and the number of IPOs. Comparing Figures 16.2 and 16.3, we see that increases in the number of new offerings tend to follow periods of significant underpricing by roughly 6 months. This probably occurs because companies decide to go public when they perceive that the market is highly receptive to new issues.

Table 16.2 contains a year-by-year summary of underpricing for the years 1975-2000. As indicated, a grand total of 6,974 companies were included in this analysis. The degree of underpricing averaged 17.8 percent overall for the 26 years examined. Securities were overpriced on average in only 1 of the 25 years; in 1975, the average decrease in value was —1.5 percent. At the other extreme, in 1999, the 491 issues were underpriced, on average, by a remarkable 68.6 percent.

Average Initial Returns by Month for SEC-Registered Initial Public Offerings: 1960-2000

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