An empirical analysis of health care IPOs and SEOs

Abstract

This article reviews the extant literature regarding the three new issues phenomena: hot issue markets, first-day underpricing, and poor long-run performance as they apply to the heath care industry. Given the "creeping corporatization" of the heath care industry and the unique influence of nonmarket forces on it, we examine whether the three IPO phenomena exist within the industry. We find that hot issue markets, initial underpricing, and negative long-run abnormal returns and sales growth occur among both heath care IPOs and SEOs. Of particular interest, we find that firms are able to issue during times of excess heath care spending and subsequently underperform the market, apparently exploiting windows of opportunity.