Effect of Stocks Par Value on Underpricing of IPO on the NewConnect Market

Abstract

This paper examine IPO process executed at NewConnect market in Poland in terms of underpricing. It should be noted that the price of shares of the company carrying out the IPO experience two effects. The first and more common is the effect of underpricing, which appears in the case when the issue price is lower than the price quoted at the close of the first day. However, in a situation where the issue price is higher than the closing price on the first day of trading, the company is overpriced. The effect of underpricing is measured by the immediate rate of return of the IPO. In the literature one can find many of the concepts explaining the cause of these effects most commonly cited reasons are: the asymmetry of information, shareholding structure, quality and position of offering a financial institution or speculation. One of the factors evidencing the impact on the level of underpricing is also the level of issue price of the company conducting an IPO. This article aims to analyze the immediate rate of return of the IPO and the impact on the level of its underpricing on the NewConnect market over the period 2007–2013.