Pre-IPO Analyst Coverage: Hype or Information Production?

We find that analyst coverage and optimism for an IPO before it starts trading have positive impacts on both its offer price revision and first-day return. Pre-IPO analyst research is also positively associated with long-run returns. Analysts with connections to the underwriter are more likely to cover an IPO and provide more optimistic forecasts. The positive impact of pre-IPO analyst research on IPO pricing remains, however, if connected analysts are excluded. Unlike the U.S. and other markets, offer price revisions are negatively related to initial returns in China. Our findings have policy implications for regulations of primary market communications.