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Part I General Aspects, 3 Stabilization and Underpricing in IPOs

Stefano Lombardo

From: Prospectus Regulation and Prospectus Liability

Edited By: Danny Busch, Guido Ferrarini, Jan Paul Franx

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 05 February 2023

Securities — Insider dealing — Market Abuse Directive (MAD)

This chapter zooms in on stabilization and underpricing in IPOs. The Market Abuse Regulation (MAR) provides an exemption from the prohibitions of insider dealing and of market manipulation for the stabilisation of securities. This is usually realised in the case of an initial public offering (IPO) and is regulated in detail by Commission Delegated Regulation 2016/1052. The chapter thus introduces the economic theory of IPOs, analysing in particular the underpricing phenomenon (and its opposite, the overpricing). After a comparative and useful description of the US system of IPO stabilization activity, the chapter focuses on a detailed analysis of the European regime under MAR and Regulation 2016/1052.

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