The pricing and performance of IPOs for small- and medium-sized enterprises: evidence from Thailand

This paper examines the pricing and performance of initial public offerings (IPOs) for small- and medium-sized enterprises (SMEs) on the Thai Market for Alternative Investments (MAI) from September 2001 to October 2008. Underpricing is calculated using headline underpricing, underpricing issuer loss, underpricing loss by market value and underpricing loss by issuer price. Aftermarket performance employs monthly cumulative abnormal returns, buy-and-hold returns and wealth relatives. The underpricing results show respective average underpricing of 12.69%, 5.01%, 4.74% and 11.40% for the measures used. This is significantly lower than the underpricing found for the large-firm IPOs listing on the Stock Exchange of Thailand (SET). However, there is much variability in pricing over the sample period, with substantial underpricing in 2003/04 and correctly priced issues on average in 2001/02 and 2005/06/07. While the performance analysis is suggestive that SMEs perform well after listing, returns adjusted for market performance indicates that this generally only holds up until the second year after listing.