Partial adjustment to public information and IPO underpricing

We examine the extent to which offer prices reflect public information for 3,325 IPOs over the period 1990-1999. We focus primarily on four variables: share overhang, file range amendments, venture capital backing, and previous issue underpricing. We show that 35%-50% of the variation in IPO underpricing can be predicted using public information known before the offer date and therefore conclude that IPO offer prices underadjust to widely available public information to a much greater extent than previously documented.