While the literature encompasses many aspects of initial public offerings around the world, it has largely ignored the issue of interest income generated by placing the application moneys in overnight money market accounts as companies prepare to allot shares to the subscribers. The confluence of highly favourable conditions namely, rising interest rates coupled with euphoria over the listing of Mainland Chinese companies is estimated to result in HK$1.8 billion, or about US$230 million, in gross interest income accruing to the companies that listed on the Main Board of Stock Exchange of Hong Kong during 2006. Using data from the 53 initial public offerings in Hong Kong for the year, this paper highlights some shortcomings of the existing system and puts forth recommendations for their rectification which principal objective is a more equitable application of this ‘windfall’.
European Business Law Review