STAPLING AND ITS IMPACT ON AUSTRALIAN LPT INITIAL PUBLIC OFFERING RETURNS

Abstract

With the recent popular trend in the stapling of securities of the Listed Property Trusts (LPT) in Australia, this study investigates the impact of stapling on the amount of underpricing stock return of the Australian LPTs. A regression analysis is used to identify the statistically significant variables which have an impact on the underpricing returns. It is found that the stapling of the LPT is statistically significant in explaining the first day underpricing return and the issue price of the LPT IPO also has strong explanatory power for the first day and market-adjusted two day returns. The forecast dividend yield is found to be significant in explaining the market-adjusted two day returns as well. This study also found that the stapled IPO LPTs (stapled at the time of public listing) provided higher first day and second day returns than the subsequent stapled LPTs (with different listing and stapling dates). A possible reason for this result is that the investors perceive the subsequent stapled LPTs as being inherently more risky due to an abrupt need for these LPTs to change their business structure which could affect business operations. Finally, this study deals with the long term performance of all the Australian LPTs and it is found that stapled IPO LPTs provided the highest amount of stock return in the long term when compared to the returns from the subsequent stapled LPTs and the normal LPTs. Normal LPTs provided the worst stock returns over the long term horizon.