New economy initial public offerings in Australia

Abstract

This study provides insights to the short and long-term performance of the Initial Public Offerings (IPOs) for new economy companies that listed on the Australian Stock Exchange in the period 1995 to 2000. New economy IPOs provided high average initial returns to subscribing investors although there is also evidence on severe overpricing. However, despite these high initial returns, Australian new economy IPOs do not on average under perform the market benchmark in the long run. The presence of some highly overpriced initial equity offerings provides support for the existence of informational asymmetry between informed (institutional) and uninformed (retail) investors in the Australian new economy IPO market