IPO Pricing in Malaysia: An Analysis of REITs and Non-REITs

This paper provides evidence of initial returns for a comprehensive data set of Malaysian Real Estate Investment Trusts (REIT) and non- REIT initial public offerings (IPOs). Factors that influence the IPO initial returns were also investigated. The sample consists of ten REITs and 134 non-REITs that went public during the period 2005-2007. We found that the average value of initial returns for REITs is significantly lower than non-REITs. Consistent with prior studies, the gross proceeds that are raised from IPOs and the offer price that are used as proxies for ex ante uncertainty, have a significant negative impact on the pricing of Malaysian REIT and non-REIT IPOs. Company size and market of listing have a significant positive relationship with IPO initial returns, but in an unexpected direction. Our results suggest that investors who purchase REIT IPO shares at the offering date and sell them immediately on the first day of trading, gain lower returns than those who purchase non-REIT IPOs