Clustering of Gross Spreads in U.S. and European IPOs: Evidence from the Era of the Rising Network Economy

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School of Business | Master's thesis
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Date

2020

Department

Rahoituksen laitos

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Mcode

Degree programme

Finance

Language

en

Pages

61

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Abstract

I show that the “7% solution” of U.S. IPO gross spreads clustering at exactly seven percent level persists during my sample period of 2008-2018. In the $25-100 million USD issue size class, the proportion of 7.00% gross spreads is over 80% in U.S. issues. Compared with the U.S., the median gross spreads remain significantly cheaper in Europe during 2008-2018. The difference, varying between 0.25-3.25%, persists even after controlling for size, time and country effects. A “3% wedge” no longer exists between U.S. and European gross spreads. Moreover, by utilising a sample of hand-collected data, I find that the founder-managers with controlling voting rights do not achieve lower gross spreads relative to their peers.

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Thesis advisor

Torstila, Sami

Keywords

clustering, gross spread, fee, initial public offering, IPO, underwriter, founder-manager, unicorn, United States, USA, Europe

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https://urn.fi/URN:NBN:fi:aalto-202008094604

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[gradu] Kauppakorkeakoulu / BIZ