Latest Research Findings For IPO Quiet Period Expirations

by: Don Dion
Summary

This is the third installment of our firm's research on IPO quiet period expirations as our strategy continues to evolve.

Since August 2014, our sample has grown from 118 companies to 315 today.

In our most profitable sample, 3.1% returns occur in the (-11, 0) day holding period for IPOs, excluding REITs and banks.

Two shorter holding periods are also included in the report.

We hope our research continues to spur discussion in the exciting space of IPOs.

Research Overview: August 2014-June 2015

We first published our findings on above market returns at the IPO quiet period expiration in August 2014. We then added an updatedreport in January 2015.

Briefly: the IPO quiet period is one of two follow-up events to initial public offerings (the second being the IPO lockup expiration), which our firm has studied for nearly four years. The event has consistently provided us and others with above-market returns in a relatively short window of time, surrounding the expiration.

Since August 2014, our sample has grown from 118 companies to 315 today. Our results are statistically significant (as you will see below). Our strategy continues to evolve.

We have learned a great deal through the process, in part due to important and inquisitive feedback from the Seeking Alpha community. We hope this latest report continues to spur discussion in the exciting space of IPOs.

For more information on our firm's background in IPOs, see here. You can also sign up for our exclusive IPO Insights at the bottom of this article.

Latest Findings

Observing three categories of IPOs (an overall sample, a sample that excludes REIT and bank IPOs, and a final sample that excludes REITs, banks, and stocks that increased more than 35% from pricing to day (-6) from the quiet period expiration (Day 0)), we have found the following:

Category 1: Overall Sample

  • There now appears to be no increase in results from holding through day +1 or day +2.
  • This is evident from how the average increase for the (-2, +2) period of days is now the same as for (-2, 0).
  • This also implies that the increase for the holding period (-5, +2) days can be attributed to day -5 through day 0.
  • The highest result for this category is still found in the (-11, 0) time period and is equal to 3.0%
  • All but one of the time periods has greater or equal results after the addition of updated data.
  • All time periods have greater statistical significance.

Category 2: Excluding REITs and Banks

  • In this category, there is also no longer an improvement in results from holding through day 1 or day 2.
  • In this category, the increase of 0.6% on day 0 by itself is now statistically significant.
  • The highest result for this category is still found in (-11, 0)
  • Also, at 3.1%, this result is the highest of all the time periods in all three categories.
  • All but one of the time periods has greater or equal results after the addition of updated data.
  • All time periods have greater statistical significance.

Category 3: Excluding REITs, Banks, and 'stocks that increased more than 35% from pricing to day -6'

  • The highest results for this category are still found in (-5, +2) period of days.
  • The result for Day 0 by itself is 0.8% and is now statistically significant.
  • For this category, holding through day 1 or day 2 brings about a marginal increase in results.
  • All but one of the time periods has greater or equal results after the addition of updated data.
  • All time periods have greater statistical significance.

Summary of Results

Below are three summarized options for holding periods for newly trading IPOs, leading up to (and in one case following) the quiet period expiration.

Since the first is a relatively long holding period, a shorter and medium holding period are provided.

  • Highest result: 3.1% in (-11, 0) for the category excluding REITs and banks.
  • Highest relatively short holding period result: 2.0% in (-2, 0) for the category excluding REITs and Banks, and 'stocks that increased more than 35% from pricing to day -6'.
  • Highest medium holding period: 2.6% in (-5, +2) for the category excluding REITs and banks, and 'stocks that increased more than 35% from pricing to day -6'.

Charts

The following charts show all the results for the categories discussed above.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.