The underpricing of US REIT IPOs: 1996-2010

摘要

This study examines the underpricing cost of 123 US REIT IPOs over the period 1996 until June 2010, including the period of the global financial crisis. The study uses OLS multivariate regression to determine some potential factors behind underpricing. The underpricing cost of raising REIT external equity averaged 3.18% using an equal weighting for each of the 123 REIT IPOs. The study finds offer size is positively related to underpricing. A value weighted approach finds that underpricing averages 4.67% and suggests larger offer size is an important determinant for leaving more money on the table. Higher reputation underwriters, the industry differentiated auditor and post offer ownership structure negatively influence underpricing. The study documents declining under-pricing over time with the period of 2007-2010 experiencing negative underpricing (overpricing) during the global financial crisis (GFC). Offers during the hot periods of 1997 and 2004 and the office/industrial property type were more highly underpriced. The 10-year treasury interest rate is identified as another significant positive determinant of underpricing.