Extracted from text ... Number 55 - Part 1 
C M'kombe and M Ward 
Aftermarket price performance of initial public offerings on the JSE 
1. Introduction* 
The objective of any initial public offering (IPO) is to achieve the highest value for the issuer while ensuring a buoyant start to secondary 
trading and strong long-term (aftermarket) performance. A share is underpriced if its offer price at the IPO is lower than the closing price 
on the first day of trade. The problem of underpricing has been extensively researched and clearly indicates some loss of value to the 
issuer. However, underpricing can act as a positive ..

Aftermarket price performance of initial public offerings on the JSE

Gao, Ritter and Zhu (2012), describes the increasing failure of IPO listings as a problem in the IPO “ecosystem” and deem the IPO market as “broken”. Fama and French (2004) claim that there has been a change in IPO characteristics over the years. All indications are that the IPO market internationally has deteriorated regarding issues such as underpricing, long term underperformance, failure and the number of IPO listings. This study therefore seeks to determine whether the performance and characteristics of IPOs on the JSE have changed when focusing on two consecutive hot market periods (1997-99 and 2006-07). The findings are, contrary to expectations, that the level of underpricing, long term underperformance as well as the success rate of IPOs in South Africa have improved over time.

The long-term performance of failed Initial Public Offerings (IPOs) on the Johannesburg Stock Exchange (JSE)

Underpricing is one anomaly in initial public offerings (IPO) literature that has been widely observed across different stock markets with different trends emerging over different time periods. This study seeks to determine how IPOs on the JSE performed on the first day, first week and first month over the period of 1996-2011. Underpricing trends are documented for both hot and cold market periods in terms of four main sectors (cyclical, defensive, growth stock and interest rate sensitive stocks). Using a sample of 360 listed companies on the JSE, the empirical findings established that IPOs on the JSE are significantly underpriced with an average market adjusted first day return of 62.9%. It is also established that hot market IPOs on the JSE are more underpriced than the cold market IPOs. Also observed is the fact that as the offer price per share increases above the median price for any given period, the level of underpricing decreases substantially. While significant differences exist in the level of underpricing of IPOs in the four different sectors in the hot and cold market periods, interest rates sensitive stocks showed a different trend from the other sectors and thus require further investigation to uncover this pattern. Keywords—Underpricing, hot and cold markets, South Africa, JSE.

Underpricing of IPOs during Hot and Cold Market Periods on the South African Stock Exchange (JSE)

This study examines the reliability of earnings forecasts that companies provide prior to listing 506 companies that listed on the JSE Securities Exchange SA from the 1st January 1980 to the 31st December 1998 are analysed. Earnings forecasts reflected in the company prospectuses were compared with actual corresponding earnings. The study shows that pre-listing earnings forecasts were inherently understated by approximately 14, 3% and that company size, JSE sector and GDP growth had significant associations with the forecast error.

The reliability of pre-listing earnings forecasts on the JSE

Mining is a highly capital intensive endeavour and access to equity capital a key requirement for the development of a mine. New mining issues are difficult to value since unseasoned companies often have no past earnings history on which to base predictions of future earnings. Some equity markets have developed large mining boards, and investors seeking the promise of the high returns risky mining investments often focus their attention on these markets.

Performance of newly listed mining stocks on the London AIM and Toronto TSX-V Stock Exchanges

Extracted from text ... Number 47 - Part 2 
R Lawson and M Ward 
Price performance of newly listed shares on the Johannesburg Stock Exchange 
1. Introduction 
The Johannesburg Stock Exchange (JSE) plays the single most significant role in capital allocation in South Africa and, with a market 
capitalisation of US$275 billion in March 1997, the JSE was the twelfth largest stock-market in the world. Equity capital raised through new 
listings, rights issues and scrip dividends during 1995 alone was almost R20 billion, indicating that research into the efficiency of the 
market in pricing new listings is important. 
The following objectives for this study ..

R. Lawson

Papers

Price performance of newly listed shares on the Johannesburg Stock Exchange