Abstract

We examine the influence of ownership structure on underpricing of initial public offerings (IPOs) in the US. While the existing literature has largely focused on either founders or venture capitalists, we show that the ownership structure of US IPOs is more complex and cannot be adequately characterized by these two types of blockholders. We find that the influence of blockholders on underpricing is not unidimensional – the positive influence of individual blockholders (venture capital backing) on underpricing is present only in the venture-backed firms (those with individual blockholders). Further, we also find that such firms experience insignificant offer price revision, suggesting that their higher underpricing is not driven by negative information revealed during the roadshow. Finally, we show that the difference in underpricing between VC-backed firms with individual blockholders and those without is no longer significant once we control for the celebrity status of individual blockholders.