Laurie Krigman

Managing the Costs of Issuing Common Equity: The Role of Registration Choice

We analyze the costs and benefits of unallocated shelf registration and explore why only a fraction of eligible firms that issue common equity take advantage of this streamlined process. We find unallocated shelf is most cost effective for firms with low information asymmetry. The market does not discount these firms’ shares when managers register common equity on shelves. Firms pay lower gross spreads and access the market faster than do firms that use the traditional registration procedure. In contrast, the market deeply discounts the shares of high information asymmetry firms that choose to register and issue common equity off shelves.

Currying Favor with Top Venture Capital Firms: The Role of IPO Underpricing and All-Star Coverage

We explore the central role that top venture capitalists play in the IPO underwriting market. We argue that underwriters curry favor with Top VCs, not necessarily issuing firms, because Top VCs have the ability to direct the most business in a repeated game sense to banks that treat them well. The relationship between VC firms and investment banks extends through time and therefore incentives extend beyond the current IPO. Consistent with this view, we find that Top VC-backed IPOs are more likely to get all-star coverage regardless of analyst bank affiliation. In turn, banks providing all-star coverage are more likely to be chosen to lead the next VC-backed deal. We find a positive relationship between underpricing and all-star coverage for Top VCs, but not non-Top VCs. Top VCs tolerate higher levels of underpricing because the information momentum generated by underpricing allows them to cash out at higher prices when the lockup expires.

IPO Pricing as a Function of Your Investment Banks’ Past Mistakes: The Case of Facebook

On May 18, 2012 Facebook held its initial public offering (IPO), raising over

The Importance of Non-CEO Inside Directors When CEOs Suddenly Depart

16 billion making it one of the largest IPOs in history. To the surprise of many investors, there was no underpricing―the stock closed the first day of trading flat from its offer price. The Facebook IPO was described as not only disappointing but also detrimental to the broader market. We explore why one IPO should have such widespread consequences. We document that the IPO market was silent for 41days following Facebook. When it re-opened 41days later, the average level of underpricing increased from 11% pre-Facebook to 20% post-Facebook. The common blame was an overall increase in risk-aversion among investors. We offer an alternative explanation. We show that the entire increase in underpricing is concentrated in the IPOs of the Facebook lead underwriters. We find no statistical difference in underpricing pre- and post-Facebook for non-Facebook underwriters. We argue that investment bank loyalty to their institutional investor client based propelled the Facebook underwriters to increase underpricing to compensate for the perceived losses on Facebook.

Why do firms switch underwriters

A firm’s ability to quickly recover from setbacks is of great importance to its stakeholders and investors. Although critics argue that inside directors decrease the monitoring effectiveness of a board, inside directors arguably possess superior firm specific experience and knowledge. The main purpose of this paper is to investigate the roles of non-CEO inside directors using the context of sudden CEO departures when immediate CEO succession planning is of great importance. Using a unique data set of 351 sudden CEO departures from 1993 to 2009, we find evidence that firms with non-CEO inside directors face fewer disruption costs and have superior performance following the change in CEO, especially when the firm hires an outsider as the new CEO.