The IPO Quiet Period Revisited

Daniel J. Bradley, Bradford D. Jordan, Jay R. Ritter and Jack G. Wolf

Volume 2, Number 3, Third Quarter 2004

A newly public company is subject to a “quiet period,” which restricts insiders and affiliated underwriters from issuing earnings forecasts and research reports regarding the firm for a specified period following the initial public offering (IPO). As soon as this quiet period ends, the analysts of managing underwriters typically initiate research coverage with favorable recommendations, and the market responds positively even though this information is predictable. In this article, we discuss previous findings regarding price patterns and analyst initiations at the end of the quiet period and introduce new evidence based on recent trends in the IPO market. We discuss trading implications and examine the effect of new regulatory requirements that extend the quiet period from 25 to 40 calendar days post-IPO.