ABSTRACT
Initial Public Offerings (IPOs) were the most prevalent form of security issues by firms wanting to raise capital in the United States during 1990-2000. The IPO phenomenon got a tremendous boost in the late 1990s by the popularity of Internet stocks. When Yahoo!, an online search engine, went public in March 1996, the investing public went agog with excitement, particularly the online traders, a new breed of individual investors. In the so-called ‘bubble period’ of 1998-1999, hardly a week went by when one or two IPOs, particularly Internet IPOs, did not appear in the capital market. In 1998, five IPOs had over 200 percent first-day returns, while in 1999, forty-eight IPOs had that distinction, with eight having returns of more than 400 percent on the first day. Also in 1999, 117 IPOs doubled their prices on the first day trading alone. It was quite possible that without the IPOs, the stock market boom of the 1990s would not have been sustained for such a long time and with such vigor as to push U.S. stock prices to historical highs. In the bull market of 1990s, it was the IPOs that created the climate of ‘irrational exuberance,’ particularly in the technology-heavy NASDAQ market. 1
