Analyst Information about Peer Firms During the IPO Quiet Period

Abstract

The SEC limits sell-side analysts’ research activities on IPO firms both before and immediately after going public (the IPO quiet period). We examine whether, in spite of these restrictions, investors uncover information about the IPO firm during the quiet period indirectly through analyst research of peer firms. Our evidence suggests peer firm research is informative about the IPO firm during the quiet period. In particular, we find that analysts’ recommendation revisions issued for peer firms are more frequent around IPOs and that these revisions are predictive of future IPO performance. We also find that IPO investors trade on the information in analysts’ revisions of peer firms on the IPO date. However, only institutional investors make full use of this information, while retail investors are generally inattentive to IPO-relevant information in peer firm research, except when analyst revisions are particularly salient. Our findings suggest that investors infer relevant information about IPO firms through analyst research of peer firms during the IPO quiet period.