Ritter is known as “Mr. IPO” for his work on initial public offerings (IPOs). He studies IPOs, asset pricing, valuation, investment banking and capital structure.
Industry Expertise (6)
Real Estate Dev/Ops
Real Estate Services
Areas of Expertise (8)
Finance, Insurance & Real Estate
Initial Public Offerings
Media Appearances (5)
Robinhood is earmarking 20% to 35% of its own IPO shares for customers. Why smaller investors should proceed with caution
ypically, smaller investors must wait until shares start trading on an exchange. And at that point, they might be paying more than those who got in early. The average first-day return for IPOs last year was 41.6%, according to data from IPO expert Jay Ritter, a finance professor at the University of Florida.
What Lordstown’s Meltdown Means for SPACs
The New York Times online
But SPACs aren’t the whole problem. Lordstown had disclosed that its pre-orders were nonbinding in its SPAC merger proxy. The S.E.C. didn’t question those orders in an inquiry into Lordstown’s disclosures at the time of its SPAC deal. Would it have been different if the company went public in a traditional I.P.O.? “There are a lot of gray areas with the way I.P.O.s and public companies report orders,” Jay Ritter of the University of Florida, an I.P.O. expert, told DealBook. The order quality issue at Lordstown “is not something that typically gets caught by auditors or in the I.P.O. process,” he said.
SoFi Customers Can Now Invest in Biotech SPACs From Venture Capitalist Palihapitiya. What to Know.
SoFi’s offering may seem lucrative but it’s unclear what the upside is for investors. SPACs usually price their transactions at $10 a share. In January and February, the height of SPAC euphoria, blank check companies typically jumped 5% to 6% in their market debuts, said Jay Ritter, a University of Florida professor who studies IPOs. That’s changed. SPACs are now trading at about $10 plus or minus some pennies, he said.
Opinion: IPO expert says Airbnb and DoorDash launch echoes internet bubble and predicts value stocks will outperform
In an interview, Ritter said that the new-issue market is “not as crazy as in 1999 and 2000, but still crazier than any other intervening years.” Support for Ritter’s assessment is provided in the accompanying chart, which incorporates data from Ritter through Dec. 9. Notice that this year’s average first-day return was 37%, which is significantly less than the 56% average in 2000 and half of 1999’s average. Nevertheless, this year’s average is higher than any other year since 2000.
IPOs are popping like it’s 1999, and executives are fed up
There are several reasons for this, ranging from regulatory changes to old hangups about investment-banking fees. But the main reason, says University of Florida professor Jay Ritter, is that public offerings have left a lot of money on the table lately.
Corporate Cash Shortfalls and Financing DecisionsThe Review of Financial Studies
Rongbing Huang, Jay R Ritter
2021 Given their actual revenue and spending, most net equity issuers and an overwhelming majority of net debt issuers would face immediate cash depletion without external financing. Debt issuers tend to have short-lived cash needs, while equity issuers often have persistent cash needs. On average, debt issuers immediately spend almost all of the proceeds, while equity issuers retain much of the proceeds in cash. Anticipated near-future cash needs and fixed costs of financing help explain the fraction of the proceeds being retained. Our findings support a funding-horizon theory in which cash needs and the nature of cash needs motivate financing decisions.
The Speed of Adjustment to the Target Market Value Leverage Is Slower Than You ThinkJournal of Financial and Quantitative Analysis
Qie Ellie Yin, Jay R Ritter
2020 In the capital structure literature, speed of adjustment (SOA) estimates are similar whether book or market leverage is used. This robustness is suspect, given the survey evidence that firms target their book leverage and the empirical evidence that they don’t issue securities to offset market leverage changes caused by stock price changes. We show that existing market SOA estimates are substantially upward biased due to the passive influence of stock price fluctuations. Controlling for this bias, the SOA estimate is 16% for book leverage and 10% for market leverage, implying that the trade-off theory is less important than previously thought.
Initial Public Offerings Chinese StyleSSRN
Yiming Qian, Jay R Ritter, Xinjian Shao
2020 This paper provides a survey of China’s IPO market. We examine the following key aspects of IPOs—the policy history, IPO pricing, bids and allocation, and aftermarket trading. We show that heavy-handed regulations result in suppressed IPO offer prices and high initial returns, resulting in a high cost of going public. As a consequence, investors treat IPOs as lotteries with extreme short-term returns, with little attention to the long-term. The auction selling method, however, works in the way it is supposed to. Mutual funds bid more smartly than other investors, and their advantages are unlikely to be due to underwriters’ preferential treatment. We also discuss the latest registration-system reform and examine IPOs under the new regime. Our study lends useful insights to countries beyond China as they weigh different approaches to IPOs.
The Puzzle of Frequent and Large Issues of Debt and EquityJournal of Financial and Quantitative Analysis, Forthcoming
Rongbing Huang, Jay R Ritter
2020 More frequent, larger, and more recent debt and equity issues in the prior three fiscal years are followed by lower stock returns in the subsequent year. The intercept of a q-factor calendar-time regression for the value-weighted portfolio of firms with at least three large issues is -0.63% per month (t-statistic =-4.31). Purging the factor returns of recent issuers increases the magnitude of the estimated underperformance following frequent equity issues. A value-weighted Fama-MacBeth regression shows that firms with three equity issues underperform non-issuers by 0.65% per month (t-statistic =-2.65). Earnings announcement returns are low following frequent issues, especially equity issues.
Pre-IPO Analyst Coverage: Hype or Information Production?SSRN
Chunxin Jia, Jay R Ritter, Zhen Xie, Donghang Zhang
2018 We find that analyst coverage and optimism for an IPO before it starts trading have positive impacts on both its offer price revision and first-day return. Pre-IPO analyst research is also positively associated with long-run returns. Analysts with connections to the underwriter are more likely to cover an IPO and provide more optimistic forecasts. The positive impact of pre-IPO analyst research on IPO pricing remains, however, if connected analysts are excluded. Unlike the U.S. and other markets, offer price revisions are negatively related to initial returns in China. Our findings have policy implications for regulations of primary market communications.