Factors and characteristics impacting underpricing of Initial Public Offerings (IPOs) on the Johannesburg Securities Exchange (JSE) - Rust, Isak Cornelis (University of the Free State, 2015)
Die navorsing is onderneem om te bepaal watter faktore en eienskappe die onderprysing van Aanvanklike Openbare Aanbiedinge (AOA's) op die Johannesburgse Sekuriteitebeurs (JSB) beïnvloed het. Die data is bekom van die JSB, AOA-prospektus en die McGregor-BFA-databasis. Die steekproef het uit 390 AOA’s van ŉ moontlike 484 tussen 1996 en 2011 bestaan, wat 80.6% van die AOA’s op die JSB vir die spesifieke tydperk verteenwoordig. Die literatuur toon dat sekere faktore en eienskappe die vlak van onderprysing van AOA’s affekteer. Vir hierdie studie is markverwante faktore, maatskappy-eienskappe en finansiële faktore ingesluit. Die data was baie skeef vanweë uitskieters in die datastel, wat veroorsaak het dat die data onbetroubaar was en dit baie moeilik was om dit te vertolk. Om die probleem reg te stel, het die studie natuurlike logaritmes gebruik om die skeefheid te verminder, die akkuraatheid te verbeter en te verseker dat die data so na as moontlik aan 'n normale verspreiding was. Beide die aanbodprys en die markkapitalisering is aangepas deur die verbruikersprysindeks (VPI) vir inflasie te gebruik. Die JSB indeks van alle aandele (IAA) is gebruik as ŉ maatstaf vir die korttermynprestasie (markaangepaste abnormale opbrengs – MAAO) en die relatiewe mediumtermyn-prestasie (koop en hou abnormale opbrengste – KHAO). Die navorsingbevindings het die volgende getoon: - Die vlakke van onderprysing op die eerste dag en in die eerste week en eerste maand was 23.0%, 22.1% en 17.3% respektiewelik. - AOA’s wat in warmmarktydperke gelys is, het beduidend hoër opbrengste ontvang. Die JSB het ŉ afname ondervind in die aantal AOA’s wat gedurende beide die latere warm en koue marktydperke gelys is. - AltX-AOA’s het beduidend hoër opbrengste gelewer. - Die elektriese en tegnologiesektor het die hoogste opbrengste gelewer, gevolg deur die finansiële en verbruikersektore. - Jonger AOA’s met 'n kleiner markkapitalisering en aanbodprys was beduidend meer onderprys as wat die groter AOA’s was. - Kleiner maatskappye, soos gemeet deur die omset, netto wins ná belasting (NWNB), totale bates en aandeelhouers se ekwiteite, was beduidend meer onderprys in vergelyking met groter maatskappye. - Die finansiële verhoudings het getoon dat AOA’s met ŉ skuldverhouding van tussen 40% en 60% die minste onderprys was. Die huidige verhouding en die opbrengs op bates (OOB) het geen statistiese beduidendheid in die voorspelling van onderprysing opgelewer nie, terwyl AOA’s met ŉ kleiner opbrengs op verdienste (OOV) beduidend meer onderprys was. - AOA’s met ŉ uiters hoë P/E-verhouding was ook beduidend onderprys. Dit was verrassend dat die markwaarde tot boekwaarde (MW/BW) nie enige beduidendheid in die voorspelling van onderprysing op die JSB getoon het nie. - Die absolute opbrengste (koop en hou opbrengste – KHO) het gevind dat die AOA’s wat aanvanklik onderprys was, positief (41.2%) oor ŉ tydperk van ŉ jaar sou presteer; hulle sou egter oor drie jaar onderpresteer (-12.0%). - Die relatiewe opbrengste (koop en hou abnormale opbrengste – KHAO) het ook gevind dat AOA’s wat aanvanklik onderprys was, positiewe opbrengste relatief tot die mark in die eerste jaar ná lysting opgelewer het (30,3%); hulle het egter ook onderpresteer (-39.8%) in die mark oor drie jaar. - Hoewel beide die warm en koue marktydperke oor ŉ driejaar-tydperk in die mark onderpresteer het, het die koue mark-AOA’s beduidend beter mediumtermynopbrengste opgelewer. - AOA’s wat op beide die hoofafdeling en die AltX gelys was, het oor ŉ driejaar-tydperk in die mark onderpresteer; die hoofafdeling-AOA’s het egter beduidend beter in die mediumtermyn presteer. Die empiriese bevindings van hierdie studie beveel aan dat beleggers AOA’s teen die aanbodprys behoort te koop en hulle aan die einde van die eerste dag van verhandeling te verkoop, omdat die vlak van onderprysing getoon het dat die opbrengste na die einde van die eerste maand afneem. Beleggers wat hulle korttermynopbrengste wil verbeter, behoort die bogenoemde faktore en eienskappe te oorweeg wanneer hulle ŉ beleggingsbesluit neem, omdat hierdie faktore as ŉ gids vir beter opbrengste kan dien

The research was undertaken to determine the factors and characteristics that impact underpricing of Initial Public Offerings (IPOs) on the Johannesburg Securities Exchange (JSE). The data were acquired from the JSE, IPO prospectus and the McGregor-BFA database. The sample consisted of 390 IPOs from a possible population of 484 between 1996 and 2011, representing 80.6% of the IPOs listed on the JSE for the specified period. The literature reveals that certain factors and characteristics affect the level of underpricing of IPOs. For this study, the market-related factors, company characteristics and financial factors were included. The data were very skew because of outliers in the dataset that caused the data to be very difficult to interpret and unreliable. To rectify this problem, the study made use of natural logarithms to reduce the Skewness, improve the accuracy and ensure that the data were close to that of a normal distribution. Both the offer price and market capitalisation were adjusted using the consumer price index (CPI) for inflation. The JSE All-share Index (ALSI) was used as a benchmark for the short-term performance (market-adjusted abnormal return – MAAR) and the relative medium-term performance (buy and hold abnormal returns – BHAR). The research findings revealed the following: - The levels of underpricing on the first day and in the first week and first month were 23.0%, 22.1% and 17.3% respectively. - IPOs listed in hot market periods received significantly higher returns. The JSE experienced a decrease in the number of IPOs being listed in both the later hot and cold market periods. - AltX IPOs achieved significantly higher returns. - The electronic and technology sector yielded the highest returns, followed by the financial and consumer sectors. - Younger IPOs with a small market capitalisation and offer price were significantly more underpriced than larger IPOs were. - Smaller companies, as measured by turnover, net profit after tax (NPAT), total assets and shareholders’ equity, were significantly more underpriced when compared to larger companies. - The financial ratios revealed that IPOs with a debt ratio of between 40% and 60% were the least underpriced. The current ratio and the return on assets (ROA) yielded no statistical significance in predicting underpricing, whereas IPOs with a smaller return on equity (ROE) were significantly more underpriced. - IPOs with an extremely high price to earnings (P/E) ratio were also significantly underpriced. It was surprising that the market value to book value (MV/BV) did not reveal any significance in predicting underpricing on the JSE. - The absolute returns (Buy Hold Return - BHR) found that IPOs that were initially underpriced would perform positively (41.2%) over a period of one year; however, they would underperform (-12.0%) over three years. - The relative returns (Buy Hold Abnormal Returns - BHAR) also found that IPOs that were initially underpriced achieved positive returns in the first year after listing (30.3%) relative to the market; however, they would also underperform (-39.8%) in the market over three years. - Although both the hot and cold market periods underperformed in the market over a three-year period, the cold market IPOs achieved significantly better medium returns. - IPOs listed on both the Main Board and AltX underperformed in the market over a three-year period; however, the Main Board IPOs performed significantly better in the medium term. The empirical findings of this study recommend that investors should buy IPOs at the offer price and sell them at the end of the first day of trading, as the level of underpricing revealed that the returns diminished towards the end of the first month. Investors seeking to improve their short-term returns should consider the above- mentioned factors and characteristics when making an investment decision, as these factors can act as a guide for superior returns.
Dissertation (M.Com.(Business Management))--University of the Free State, 2015
Keywords: IPO; Underpricing; JSE; Natural logarithms; Skewness