Short- and Long-Run Performance of Initial Public Offerings in Postapartheid South Africa

Abstract

This paper examines the impact of liberalization on initial public offering (IPO) performance in postapartheid South Africa. Results indicate a significant reduction in IPO underpricing in the postapartheid period relative to the level reported for IPO offerings in the apartheid period. Significant long-term underpricing for periods of up to two years following the IPO is noted. Many IPO offerings in South Africa are delisted and acquired or merged within three to five years of the IPO offering. Subsequently acquired IPOs are found to be more underpriced than are nonacquired IPOs, a result consistent with the use of IPOs as a means of facilitating acquisitions and mergers.