IPO waves and the issuance process

- IPOs in registration vary between $3.1 and $30.3 billion from 1998 to 2011.
- Decline in IPO activity around dot-com bust but less so around credit crisis.
- Past filings, issuances, withdrawals, and filings changes drive current IPO activity.
- IPO return volatility, VC takedown, and age of pipeline impact IPO activities.

This study examines the impact of institutional features of the IPO market on patterns of IPO activity (waves). Decisions made by firms to enter the market by filing registration documents, adjusting terms while remaining in registration or exiting the market through issuance or withdrawal affect the “value in registration” of issuers seeking capital. We argue that these past decisions convey private information about issuers' collective view on the state of the IPO market (beyond what is indicated by other macroeconomic and market condition indicators), affecting current activity. In addition to considering the role of past activity on issuance decisions, we introduce additional variables to reflect observable IPO market conditions that affect IPO activity: the standard deviation of IPO initial returns; Venture Capital takedown; and the average age of IPOs in registration. Our new variables add substantial explanatory value to prior models of IPO activity.