Book value per share, issue price and 1st trading day prices of IPOs at NSE

Abstract

Over the last 27 years (1980-2006) there has been increased listing at the Nairobi Stock Exchange (NSE). In total there have been 25 public issues out of which 17 were initial public offers. This study establishes the relationship between the pre-issue book value per share, the issue price and short-run (first trading day) price ofIPOs following listing at NSE. Secondary data on the three variables was collected from public documents and analyzed using SPSS to determine if any relationships exist. The study findings reveal that the book value of the share, a historical accounting number has little significance in predicting the issue price. The relationship between the two variables is not significant. The study findings show that the book value per share, combined with the issueprice, have a significant relationship with the initial market ( 1st trading day) price.