Financial Decisions - Document Index

Alternatives for Going Public: Evidence from

Reverse Takeovers, Self-Underwritten IPOs,

and Traditional IPOs

Kimberly C. Gleason^*, Ravi Jain^**, and Leonard Rosenthal^***

^*Florida Atlantic University

^**National University of Singapore

^***Bentley College

Abstract

We examine the characteristics of firms that go public using a reverse takeover (RT) or self-underwritten (SU) IPO instead of a conventionally underwritten IPO. Relative to control IPOs, firms that use alternative mechanisms to go public tend to be less profitable but exhibit similar levels of distress. After going public, RT and SU firms exhibit lower trading liquidity and higher volatility than matched IPO firms. While IPO firms experience significant increases in institutional support those using RTs and SUs experience declines. Firms that use alternative mechanisms outperform their matched IPO counterparts in the short term, and exhibit comparable performance in the three years following going public.

Keywords: merger, going public, IPO, underwriting

JEL Classification: G30, G34