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Strategies on initial public offering of company equity at stock exchanges in imperfect highly volatile global capital markets with induced nonlinearities

Ledenyov, Dimitri O. and Ledenyov, Viktor O. (2014): Strategies on initial public offering of company equity at stock exchanges in imperfect highly volatile global capital markets with induced nonlinearities.

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Abstract

This research considers the strategies on the initial public offering of company equity at the stock exchanges in the imperfect highly volatile global capital markets with the nonlinearities. We provide the IPO definition and compare the initial listing requirements on the various markets. We analyze the IPO techniques: the fixed-price offerings, auctions, book-building. We focus on the IPO initial underpricing, long-run performance and after market liquidity problems. 1. We propose that the information absorption by the investors occurs in the evolving learning process about the company’s value, taking to the consideration the fundamental purpose of investing and the responsibilities of investors. 2. We think that the information absorption capacity by the investors on the IPOs impacts the investor’s investment decisions and serves as a pre-determinant for the successful IPO deal completion. We propose the Ledenyov theory on the origins of the IPO underpricing and long term underperformance effects, which states that the IPO underpricing and long term underperformance can be explained by the changing information absorption capacity by the investors on the IPO value. 3. We think that the IPO winning virtuous investment strategies can only be selected by the investors with the highest information absorption capacity through the decision making process on the IPO investment choices at the selected stock exchange in the imperfect highly volatile global capital markets with the nonlinearities; applying the econophysical econometrical analysis with the use of the inductive, deductive and abductive logics in the frames of the strategic choice structuring process, that is the winning through the distinctive choices process.

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