Google Searches and IPO Performance

Abstract

We investigate the impact of retail investor attention, measured by Google Search Volume Index (SVI), on price revision, underpricing and post-IPO performance. We also investigate how these three IPO phenomena affect each other. We find that SVI between filing and initial pricing predicts price revision. Furthermore, we find that IPOs with either a very high increase or decrease in Google searches during the filing period experience the highest level of underpricing. Moreover, we find that positive price revisions results in higher underpricing. Lastly, we do not find any relationship between SVI during the filing period and post-IPO performance. Instead, we find that SCOOP rating, representing expected first-day premium, predicts underperformance. Hence, our results are more in line with the anticipation theory than the attention theory. In addition, we find that IPOs with very high or very low first-day return underperform other IPOs.