Initial public offerings (IPOs): The Spanish experience

This study examines the Spanish IPOs and possible links between a firm's characteristics and the degree of mispricing. The results are consistent with those of similar studies in other countries. Data reveal that the price adjustment process of Spanish IPOs needed, on average, a longer period of time. This study provides evidence that IPOs in the Spanish market have experienced, on average, an underpricing of 11%. In addition, it is possible to reduce the degree of underpricing by selecting the optimum timing, correct underwriter, and type of placement. Handsome returns may be earned by investing in new issues, but liquidating holdings in the first 90 days after the first market price. Our results reveal a low level of efficiency for the Spanish IPO markets over the period of 1986-90.