The Expiration of IPO Share Lockups LAURA CASARES FIELD and GORDON HANKA

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The Expiration of IPO Share LockupsLAURA CASARES
FIELD and GORDON HANKA

• Presented by M9880105 ???
• M9880202 ???
• M9880206 ???

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Introduction

• Share Lockups
• The typical lockup lasts for 180 days
• When lockups expire, we find a permanent 40
  percent increase in average trading volume and a
  statistically prominent three-day abnormal return
  of -1.5 percent
• Venture Capital effect
• Information asymmetry

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Flowchart
I. Data and Methods
II. Results
III. Hypotheses
IV. Ownership Changes after the IPO
V. Reported Insider Sales Before the Unlock Day
VI. Conclusion
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I. Data and Methods

• (A). The sample
• Writer use information from Securities Data
  Corporation (SDC) to identify our sample of
  initial public offerings(IPO).
• This paper examine three variables
• 1.the number of shares offered
• 2.the length of the lockup period
• 3.and the number of shares locked up.

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I. Data and Methods

• (B). Summary Statistics
• Table I

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I. Data and Methods

• (B). Summary Statistics
• Figure 1

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I. Data and Methods

• (C)Calculation of Abnormal Returns

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I. Data and Methods

• (D) Calculation of Abnormal Volume

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II. Results

• (A). Abnormal Returns Around the Unlock Day
• Figure 2

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II. Results

• (A). Abnormal Returns Around the Unlock Day
• Table II

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II. Results

• (B). Abnormal Trading Volume Around the Unlock
  Day
• Figure 3

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II. Results

• (C). Cross-sectional Determinants of the Abnormal
  Volume and Return
• Venture Financing
• Among the venture-financed firms, the three-day
  abnormal return is almost three times larger than
  non-venture-financed firms and the three-day
  abnormal volume is five times higher 75 percent
  above normal rather than 15 percent.

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II. Results

• (C). Cross-sectional Determinants of the Abnormal
  Volume and Return
• Robustness Checks
• Is This a Day 180 Effect?
• observing a Lockup effect, rather than a Day
  180 effect

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II. Results

• (C). Cross-sectional Determinants of the Abnormal
  Volume and Return
• Table III

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III. Hypotheses

• (A). An Increase in the Proportion of Trades at
  the Bid
• Figure 4

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III. Hypotheses

• (B). Price Pressure

Figure 2
Figure 4
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III. Hypotheses

• (C). Trading Costs
• Figure 5

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III. Hypotheses

• (D). Downward-Sloping Demand Curves
• A demand curve effect is caused by a permanent
  increase in the stock of shares that must be
  owned by the public, whereas a price pressure
  effect is caused by a temporary flow of sell
  orders.
• (E). Worse-than-Expected Insider Sales
• Conclude that the abnormal return is probably not
  driven solely by worse-than-expected insider
  sales.

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IV. Ownership Changes after the IPO

• Table 6

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V. Reported Insider Sales Before the Unlock Day

• Here provide evidence on the frequency of early
  release
• if the stock price is high relative to the offer
  price, and trading volume is not too thin, the
  underwriter will occasionally grant small,
  partial early release to executives who need cash
  for personal reasons.

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VI. Conclusion

• Insider sales tend to convey bad news ,
• permanent 40 percent increase in trading
  volume and a statistically prominent three-day
  abnormal return of -1.5 percent.