Gentlemanly capitalism revisited: a case study of the underpricing of initial public offerings on the London Stock Exchange, 1946–861

Authors:
DAVID CHAMBERS
Published Online:
08 Jul 2009
DOI:
10.1111/j.1468-0289.2008.00457.x
Pages:
31-56
Volume/Issue No:
Volume 62 Issue s1

Additional Options

Allegations of British capital market failure are numerous, but frequently contentious. This paper revisits the literature by highlighting the post‐1945 market for initial public offerings (IPOs) as a clear instance of capital market failure. Despite the tender method delivering substantially lower underpricing than the traditional fixed‐price offer method, it was adopted by only one in 10 firms going public. This missed opportunity cost issuing firms between £1.7 billion and £3.5 billion in real proceeds forgone between 1960 and 1986, excluding privatizations, and was symptomatic of a lack of competition in equity underwriting before Big Bang.

© Economic History Society

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