IPOs- hot and cold.

iDvide IPOs into two separate categories, hot and cold IPOs. IPOs are divided based on first day flipping activity, an asset that is constantly flipped is considered hot. The authors found that cold IPOs continue to underperform and hot IPOs continue to do well in the following year. The possible explanation for this relies in underwriter’s willingness to let original shareholders win at the expense of new investors. This causes the market to correct itself in the first few days following the release of new information.