THE EFFECT OF INITIAL PUBLIC OFFERING ON THE STOCK PRICES

OF RIVAL COMPANIES
Mary Allison L. Alcala, Angel Ann H. Alagon, Edlyn Maegan A. Alog,
Maria Cristina C. Amado, Nicole Marie Anos
University of Santo Tomas
Abstract
The study focuses on the effects of initial public offering on the stock price levels of companies
listed and quoted in the Philippine Stock Exchange. The study adopted a quantitative research
method. The target population was the 269 companies listed at PSE from the seven major sector
classifications and a sample size of 30 companies. Secondary data was gathered from the stock
quotations provided by PSE and existing related literature explaining information on IPO.
Measure of central tendency, measure of variability, and linear regression analysis were used to
calculate the significant difference of the stock prices as result of IPO. The study found that IPO
has an impact on the stock prices of rival companies.
Keywords: Initial public offering, stock prices

1. Introduction
Initial public offering (IPO) has been considered as one of the hottest issues in the stock market
since the early nineties (Albano, 2013), upholding the fact that it is an essential undertaking to a
business lifecycle. It is primarily used by private companies as a scheme to raise capital in order
to finance their current business operations, pay existing debts, or pioneer projects in the future.
Furthermore, Kim and Weisbach (2005), Grundvall, Jakobsson and Thorell (2004) also noted
other motives of companies to undergo such phenomena such as the following: garnering of
publicity and status, employee ownership, and liquidity of shares.
IPO is hereinafter formally defined as: “The process by which companies go from private to
publicly held and traded one, and sell stocks shares in their firm” (Koba, 2013). It is the common
method by which a company becomes “listed” in the Philippine Stock Exchange (PSE), hence
the ownership of shares in a company is apportioned for the advantage of the investors and the
domestic market (Albano, 2013).
In the Philippines, the number of IPOs generally increased during mid-1980s and 1990s as a
correspondence to a resurging stock market and trend of liberalizing the economy. The country
was reported to have the best performing stock market in the world in the 18 months that
followed the 1986 EDSA revolution (Sy, 2016). The historical events at the time not only
effected a political and economic change but also provided a needed catalyst for stock market
activity.
The Philippine stock market recently shows signs of stability which make it an outlier and a safe
haven in Asia given that the other economies are weak (Reyes, 2016). This is evidenced by the
stock launch of most prominent companies situated in the country during the first quarter of
2016, the list dominated by the Pilipinas Shell Petroleum Corporation which has sold its shares
worth P29.7 billion to the general public. As stated by Marquez (2016) on International Business
Times, the launch could even be higher than the three largest IPOs in the country thus far
namely, Robinsons Retail Holdings, Inc. (P28.11 billion in 2013), SM Investments Corp.
(P26.25 billion in 2005), and Cemex Holdings Philippines Inc. (P25.1 billion in 2016).
1.1. Theoretical Framework
The study is anchored to several theories such as the basic concept in economics on the law of
supply and demand, information asymmetry theory, signaling theory, and substitution effect.
According to the law of demand, there is an inverse or negative relationship between price and
quantity demanded. It signifies that other things equal, when the price falls, the quantity
demanded rises, and as price rises, the quantity demanded falls. People buy more of a product,
service, or resource as its price falls (McConnell, Brue, & Flynn, 2014).
During initial public offering (IPO), underpricing increases the demand for the stocks of the
newly listed companies. One of the most prominent reasons is that IPO underpricing occurs
because of information asymmetry wherein either the buyer or the seller has more access to
higher quality of information about the firm. Majority of investors simply invest in companies
they can afford and not necessarily consider the quality of the stocks because they are
uninformed investors. On the other hand, informed investors strategically underprice to
maximize gains from selling their shares or issuing seasoned equity offering (SEO). In effect,
when firms underprice their initial offerings, it is able to signal its quality since only high-quality
firms can bear the costs of selling stocks below market expected value which is referred to as the
signaling model (Chen, 2014).
Moreover, in economics and particularly in consumer theory, substitution effect is also an
underlying result of the law of demand. The substitution effect is centered upon the idea that an
increase in the price of one encourages consumers to buy the alternative which has a relatively
lower price. Conversely, the decrease in the price of one will increase the demand for its
substitute good. Consumers will replace more expensive items with cheaper alternatives. This is
evident in the fact that, buyers look for a similar product, a substitute, which can give them the
same satisfaction but at a relatively lower price (Pettinger, 2013). In relation to the case wherein
a company undergoes IPO since shares of stock in an IPO has a relatively lower price compared
to those shares from rival companies which are held by investors, the said investors will be
encouraged to sell these shares in order to buy the shares offered in IPOs since it has lower
prices. Hence, it will also have an effect with the supply and demand of both the company
engaging in IPO and its rival companies.
As a consequence of the aforementioned theories, the supply of the stocks of the rival companies
will increase as investors will prefer the stocks of the newly listed company. According to Mauer
(2016), it is inarguably a good approach that existing investors sell high their current stocks in
order to buy low the underpriced stocks of the newly listed company. As a consequence, the
stock prices of the rival companies will rise in direct proportion with the quantity supplied. The
law of supply states that as price rises, the quantity supplied rises as well; and as price falls, the
quantity supplied falls thereby exhibiting a direct relationship with one another. Therefore, other
things equal, firms produce and offer for sale more of their product at a high price than at a low
price (McConnell, Brue, & Flynn, 2014).
 1.2. Literature Review
Corporations may be classified as to whether or not their stocks are offered to the public. A
corporation whose stocks are not actively traded and is owned by relatively few individuals is
referred to as a closely held corporation. In contrast, a corporation that is owned by a relatively
large number of individuals is called a publicly owned corporation (Brigham & Houston, 2013).
An initial public offering (IPO) refers to the issuance and sale of stocks of a closely held
corporation to the general public.
News of a widely-anticipated IPO triggers an avalanche of press coverage. Surprisingly, almost
none of that coverage explains the rationale behind the company and its decision to go public.
When a certain company is considering whether to go public or not, they weigh a lot of
advantages and disadvantages. Pagano, Panetta & Zingales (1998) stated that going public is
often regarded as the next step of growth for a company. However, they clarified that there are
many factors to consider when analyzing a company’s decision to go public.
The first advantage of going public is that a new source of finance becomes available for the
company. According to Röell (1996), recently listed companies can use the capital raised to
acquire other companies, repay current loans, make capital investments or assure stable future
growth. Secondly, going public is often used as a marketing tool. Röell (1996) stated that going
public improves a company’s image and yields immediate publicity. A third benefit of going
public is the ability of the company to raise capital at more attractive rates. Valuations are
typically higher in a public financing because the stock sold can be freely traded whereas stock
sold in a private financing is not. Investors are usually willing to pay a much higher price for a
security that has greater liquidity. Diversification is another advantage. Rock (1986) mentioned
diversification as one of the main reasons to go public and stated that the reason for this is that
investors are generally risk averse and therefore try to spread risks. As Pagano (1993) pointed
out, sometimes going public is the only possible way for a company to diversify.
The IPO market in the Philippines was burdened by the process of setting prices and allocating
shares. Before, the IPO actual offer price determination is typically set by the underwriter based
on comparable price-to-earnings ratio for both the industry and overall market. However, with
the SEC implementation of the book-building process in 1997, the stock prices were set without
considering the unique growth prospects of a firm and the perception of the investors. Thus, the
offer price depends on the discretion of the applicant after considering the allocation requirement
under the book-building program for qualified institutional buyers (QIBs), local small investors,
and the general public. The distribution of shares in IPO market based on the book building
program allocates 60% for QIBs, 10% for local small investors, and 30% for general public
(Bagayao & Manalo, 2016).
Companies that go public often underprice their shares in order to guarantee positive initial
returns for the new shareholders. A large part of the existing literature has focused on the
underpricing of IPOs, which measures the difference between the offer price of an IPO and the
closing price on the first day the IPO trades. Since companies underprice their stock, rival firms
will suffer from an IPO at least temporarily. This implies that IPOs have a negative effect on the
stock price of rival firms (Brands, 2014).
On the other hand, IPOs during the period immediately following issuance had been documented
to realize large positive returns which has been attributed to underpricing. In the Philippines, a
study shows a sample of 104 IPOs during the 11-year period 1987 through 1997 which has
average initial returns of 22.69%. The issue and evidence shows that this underpricing is greater
for smaller and younger companies [Ritter (1984); Chalk & Peavy (1987); Ibbotson, Sindelar, &
Ritter (1994)]. There is also evidence that IPO underpricing is cyclical, being positively
correlated to general market movements and suggesting that investor sentiments play a role in
the timing and pricing of equity offers [Reilly (1977); Loughran, Ritter, & Rydqvist (1994)].
In addition to this, there is an increasing popularity of IPOs in the Philippines which may be a
result of improving opportunities and decreasing costs. This period is marked by declining
political risk and a corresponding economic expansion. Moreover, this period is characterized by
rapid financial market liberalization as well as more favorable regulation for security issues
which serve to decrease the direct and indirect costs in the new issues market such as lower
listing fees, improved compliance regulation, and lower commission due to a greater competition
for underwriting and advising. Moreover, large first-day returns earned by investors purchasing
the initial public offer of a Philippine company are consistent with what has been documented in
other countries (Sullivan & Unite, 1999).
1.3. Conceptual Framework
The study will use the input–process–output model to present the effect of the initial public
offering of the companies and the stock prices of its rivals.
Figure 1. Research paradigm
 In the illustration, the input components include stock quotations of rival companies,
qualitative information from the correspondent, and existing studies and theories on related
literature.

The process model indicates the steps on how to achieve the objectives of the study. It
consists of statistical methods, conduction of an interview, and analysis and interpretation of
related literature. The output model describes the final results of the study that indicate the effect
between the initial public offering and stock prices of rival companies.
1.4. Hypothesis and Model
As a consequence of the current news and trends regarding initial public offering (IPO) in the
country, the researchers are inspired to perform a study on the effect of an initial public offering
on the stock prices of rival companies through the utilization of appropriate statistical methods
and further review of related literature. The hypothesis for the study is:
HO1: The initial public offering (IPO) of the companies has no significant impact on the
stock prices of its industry rivals.
It is expected that the outcome of the study will result to a better understanding of stock price
fluctuations and will aid publicly listed firms in assessing the possible effects of an initial public
offering on their stock prices as perceived by the marginal investor. The researchers believe that
the results of the study will be relevant to beneficiaries such as investors, company management,
policymakers, and students and practitioners.

Input Process Output

 Stock quotations
 Review of related
literature
 Qualitative data from
the correspondence
 Statistical methods
 Analysis and
interpretation of
related literature
 Interview process
 Degree of correlation
 Better comprehension
of stock price changes

2. Method
The type of research that was used in the study was a quantitative research. The research group
examined the phenomenon of initial public offering (IPO) and its impact on the stock prices of
rival companies through numerical representations and statistical analysis.
2.1. Subjects
Stocks listed and traded in the PSE are classified into seven sectors namely: Financials,
Industrial, Holding Firms, Property, Services, Mining and Oil, and Small and Medium-Sized
Enterprises (SMEs). Each sector is comprised of several subsectors that give market participants
better guidance or comparability in assessing the performance of different companies in the
market. The Financials sector, with 31 listed companies, includes companies engaged in banking,
investment, and finance. 18 companies are listed in the Banks subsector while 13 companies are
listed as part of the Other Financial Institutions subsector. The Industrial sector, with 68 listed
companies, comprises of companies involved in varying industries representing its subsectors. 15
companies are engaged in the production or transmission of electricity, energy power, and water;
23 companies are involved in the production of food, beverage, and tobacco; 11 companies are
engaged in construction, infrastructure and allied services; 6 companies are involved in the
production of chemicals; 7 companies are in the business of producing electrical components and
equipment; and 4 companies are listed as other diversified industrials. The Holding Firms sector,
with 40 listed companies, includes companies or firms that control or manage partial or complete
interest in another company or other companies. The Property sector, with 37 listed companies,
includes companies involved in land and property development. The Services sector, with 63
listed companies, include 6 companies involved in media, 3 in telecommunications, 9 in
information technology, 11 in transportation services, 5 in hotel and leisure, 10 in casinos and
gaming, 4 in education, 7 in retail, and 8 in other diversified services. The Mining and Oil sector,
with 25 listed companies, includes companies engaged in mineral extraction, oil exploration,
extraction and production. 20 companies are under the Mining subsector while 5 companies are
under the Oil subsector.
In the study, a total number of 30 companies among all the sectors were chosen as a sample. The
research group selected 4 companies from the Financial sector, 2 from the Holding Firms sector,
11 from the Industrial sector, 2 from the Property sector, 5 from the Service sector, 5 from the
Mining and Oil sector, and 1 from SMEs. These companies conducted IPO from 2007 up to the
present.
2.2. Instruments
The instrument adopted for this study came from a secondary source of stock quotations of the
publicly listed companies per industry: Financial, Holdings, Industrial, Property, Service,
Mining, and SMEs one month before and after the time of their IPO. The quantitative data
gathered for those months was sufficient and appropriate for the reason that the effect of IPO is
mostly evident for a short period of time. Secondary source of data attracts most researchers for
its cost and time effectiveness advantages.
The researchers collected the secondary data mainly from the official website of Philippine Stock
Exchange, Inc. (PSE) where daily stock quotations are posted and additional information were
provided by an authorized employee from a brokerage company. The Philippine Stock
Exchange, Inc. (PSE) is a private non-profit and non-stock organization created to provide and
maintain a fair, efficient, transparent and orderly market for the purchase and sale of securities
such as stocks, warrants, bonds, options and others. It facilitates the selling and buying of the
issued stocks and warrants. Furthermore, it provides a suitable market for the trading of
securities to individuals and organizations seeking to invest their savings or excess funds through
the purchase of securities.
2.3. Data Collection Procedure
The data used for the study was obtained from the Philippines Stock Exchange, Inc.’s (PSE)
website and files provided by an authorized and reliable source. Using the available stock
quotations on the Internet, the daily stock prices of each rival one month prior and subsequent to
its IPO date were accumulated and analyzed by the application of appropriate statistical methods.
The stocks listed and traded on PSE were used for the 4 companies under the Financial sector, 2
companies for the Holding Firms sector, 11 for the Industrial sector, 2 for the Property sector, 5
for the Service sector, 5 for the Mining and Oil sector and 1 for the SMEs.
The sampling technique used in the study was judgmental sampling. The population were all the
companies that are listed on PSE. It was stratified into seven major sectors as classified by the
PSE and further divided into different subsectors. From each of these subsectors, the sample size
was drawn based on the IPO date of the companies, choosing those that offered their stocks to
the public in 2007 onwards.
2.4. Data Analysis
In getting the sample size, the research group chose all the companies that conducted IPO from
2007 up to the present. The data collected were tabulated and analyzed. The analysis were
guided using the following three statistical treatments:
o Measure of Central Tendency
For each rival of the sampling units or selected companies, the mean of the stock prices from one
month prior and the mean one month subsequent to its initial public offering was used to capture
the average stock prices.
o Measure of Variability
From the mean, the standard deviation was computed to determine the variability of the stock
prices of the rival companies.
o Linear Regression Analysis
The last method was used as a way to model the relationship between an independent variable
and a dependent variable.
2.5. Ethical Consideration
The research group ascertained the quality of the data gathered and the integrity of procedures
conducted to present entirely factual results to intended beneficiaries. Relying on secondary
sources for information made the study more efficient and accurate in providing the data needed.
It is assured that these data are the most suitable to the study to ensure consistency in handling
information.
Furthermore, the research group also made sure that the ownership of the original data was
properly acknowledged and published works of other authors were cited using an appropriate
referencing system. The content from the secondary sources are genuine and authentic.
Lastly, the highest level of objectivity in the discussion section and analyses of result was also
observed all throughout the conduct of research. The results are presented in an unbiased and fair
manner.

3. Results
 3.1. Financial Sector

Table 1. Effect of IPO on the Stock Prices of AG Finance Incorporated’s Rival Companies
Interpretation Number of Rivals
Reject 7
Accept 1
Total number of rivals 8
This table shows the number of companies whose stock prices were affected as a result of the IPO of
AGF.

Table 2. Effect of IPO on the Stock Prices of East West Banking Corporation’s Rival Companies
Interpretation Number of Rivals
Reject 9
Accept 2
Total number of rivals 11
This table shows the number of rival companies whose stock prices were affected as a result of the IPO of
EW.

Table 3. Effect of IPO on the Stock Prices of Philippine Business Bank’s Rival Companies
Interpretation Number of Rivals
Reject 10
Accept 3
Total number of rivals 13
This table shows the number of rival companies whose stock prices were affected as a result of the IPO of
PBB.

Table 4. Effect of IPO on the Stock Prices of Asia United Bank’s Rival Companies
Interpretation Number of Rivals
Reject 9
Accept 5
Total number of rivals 14
This table shows the number of rival companies whose stock prices were affected as a result of the IPO of
AUB.

3.2. Industrial Sector

Table 5. Effect of IPO on the Stock Prices of Megawide Construction Corporation’s Rivals
Interpretation Number of Rivals
Reject 3
Accept 4
Total number of rivals 7
This table shows the number of companies whose stock prices are affected as a result of the IPO of
MWIDE.
Table 6. Effect of IPO on the Stock Prices of Integrated Micro-Electronics Inc.’s Rival
Companies
Interpretation Number of Rivals
Reject 1
Accept 1
Total number of rivals 2
This table shows the number of companies whose stock prices are affected as a result of the IPO of IMI.

Table 7. Effect of IPO on the Stock Prices of Cirtek Holdings Philippines Corporation’s Rivals
Interpretation Number of Rivals
Reject 1
Accept 2
Total number of rivals 3
This table shows the number of companies whose stock prices are affected as a result of the IPO of
TECH.

Table 8. Effect of IPO on the Stock Prices of Philippine H2O Corporation’s Rival Companies
Interpretation Number of Rivals
Reject 8
Accept 4
Total number of rivals 12
This table shows the number of companies whose stock prices are affected as a result of the IPO of H2O.

Table 9. Effect of IPO on the Stock Prices of Emperador, Inc.’s Rival Companies
Interpretation Number of Rivals
Reject 9
Accept 4
Total number of rivals 13
This table shows the number of companies whose stock prices are affected as a result of the IPO of EMP.

Table 10. Effect of IPO on the Stock Prices of Del Monte Pacific Limited’s Rival Companies
Interpretation Number of Rivals
Reject 12
Accept 2
Total number of rivals 14
This table shows the number of companies whose stock prices are affected as a result of the IPO of
DMPL.

Table 11. Effect of IPO on the Stock Prices of Concepcion Industrial Corporation’s Rivals
Interpretation Number of Rivals
Reject 3
Accept 1
Total number of rivals 4
This table shows the number of companies whose stock prices are affected as a result of the IPO of CIC.

Table 12. Effect of IPO on the Stock Prices of Century Pacific Food, Inc.’s Rival Companies
 Interpretation Number of Rivals
Reject 13
Accept 5
Total number of rivals 18
This table shows the number of companies whose stock prices are affected as a result of the IPO of
CNPF.

Table 13. Effect of IPO on the Stock Prices of Phoenix Semiconductor Philippines Corp.’s
Rivals
Interpretation Number of Rivals
Reject 6
Accept 0
Total number of rivals 6
This table shows the number of companies whose stock prices are affected as a result of the IPO of
PSPC.

Table 14. Effect of IPO on the Stock Prices of Crown Asia Chemicals Corporation’s Rivals
Interpretation Number of Rivals
Reject 2
Accept 3
Total Number of Rivals 5
This table shows the number of companies whose stock prices are affected as a result of the IPO of
Crown.

Table 15. Effect of IPO on the Stock Prices of Philippine Shell Petroleum Corporation’s Rivals
Interpretation Number of Rivals
Reject 11
Accept 2
Total Number of Rivals 13
This table shows the number of companies whose stock prices are affected as a result of the IPO of
SHLPH.

3.3. Holding Firms Sector

Table 16. Effect of IPO on the Stock Prices of GT Capital Holdings, Inc.’s Rival Companies
Interpretation Number of Rivals
Reject 22
Accept 10
Total Number of Rivals 32
This table shows the number of companies whose stock prices are affected as a result of the IPO of
GTCH.

Table 17. Effect of IPO on the Stock Prices of Top Frontier Investment Holdings, Inc.’s Rivals
Interpretation Number of Rivals
Reject 22
 Accept 8
Total Number of Rivals 30
This table shows the number of companies whose stock prices are affected as a result of the IPO of TFIH.

3.4. Property Sector

Table 18. Effect of IPO on the Stock Prices of Double Dragon Properties Corp.’s Rival
Companies
Interpretation Number of Rivals
Reject 25
Accept 8
Total Number of Rivals 33
This table shows the number of companies whose stock prices are affected as a result of the IPO of DD.

Table 19. Effect of IPO on the Stock Prices of 8990 Holdings, Inc.’s Rival Companies
Interpretation Number of Rivals
Reject 10
Accept 7
Total Number of Rivals 17
This table shows the number of companies whose stock prices are affected as a result of the IPO of
House.

3.5. Service Sector

Table 20. Effect of IPO on the Stock Prices of IP E-Game Ventures, Inc.’s Rival Companies
Interpretation Number of Rivals
Reject 1
Accept 2
Total Number of Rivals 3
This table shows the number of companies whose stock prices are affected as a result of the IPO of IP
EG.

Table 21. Effect of IPO on the Stock Prices of Cebu Air, Inc.’s Rival Companies
Interpretation Number of Rivals
Reject 5
Accept 1
Total Number of Rivals 6
This table shows the number of companies whose stock prices are affected as a result of the IPO of CEB.

Table 22. Effect of IPO on the Stock Prices of Apollo Global Capital, Inc.’s Rival Companies
Interpretation Number of Rivals
Reject 4
Accept 1
Total Number of Rivals 5
This table shows the number of companies whose stock prices are affected as a result of the IPO of APL.
Table 23. Effect of IPO on the Stock Prices of Travelers International Hotel Group, Inc.’s Rivals
Interpretation Number of Rivals
Reject 3
Accept 3
Total Number of Rivals 6
This table shows the number of companies whose stock prices are affected as a result of the IPO of RWM.

Table 24. Effect of IPO on the Stock Prices of Discovery World Corporation’s Rival Companies
Interpretation Number of Rivals
Reject 3
Accept 1
Total Number of Rivals 4
This table shows the number of companies whose stock prices are affected as a result of the IPO of DWC.

3.6. Mining and Oil Sector

Table 25. Effect of IPO on the Stock Prices of Century Peak Metals Holdings Corporation’s
Rivals
Interpretation Number of Rivals
Reject 7
Accept 9
Total Number of Rivals 16
This table shows the number of companies whose stock prices are affected as a result of the IPO of CPM.

Table 26. Effect of IPO on the Stock Prices of Nickel Asia Corporation’s Rival Companies
Interpretation Number of Rivals
Reject 9
Accept 8
Total Number of Rivals 17
This table shows the number of companies whose stock prices are affected as a result of the IPO of Nickel
Asia Corporation.

Table 27. Effect of IPO on the Stock Prices of Coal Asia Holdings Incorporated’s Rival
Companies
Interpretation Number of Rivals
Reject 10
Accept 7
Total Number of Rivals 17
This table shows the number of companies whose stock prices are affected as a result of the IPO of Coal.

Table 28. Effect of IPO on the Stock Prices of PXP Energy Corporation’s Rival Companies
Interpretation Number of Rivals
Reject 1
Accept 3
 Total Number of Rivals 4
This table shows the number of companies whose stock prices are affected as a result of the IPO of PXP.

Table 29. Effect of IPO on the Stock Prices of Trans-Asia Petroleum Corporation’s Rivals
Interpretation Number of Rivals
Reject 1
Accept 4
Total Number of Rivals 5
This table shows the number of companies whose stock prices are affected as a result of the IPO of
TAPET.

3.7. Small and Medium Enterprises

Table 30. Effect of IPO on the Stock Prices of Italpinas Development Corporation Inc.’s Rivals
Interpretation Number of Rivals
Reject 1
Accept 0
Total number of Rivals 1
This table shows the number of rival companies whose stock prices were affected as a result of the IPO of
IDC.

4. Discussion
Results of the study (Table 1) show that 87.5% or 7 out of 8 rival companies of AG Finance
Incorporated Inc.’s experienced stock price fluctuations as a consequence of AGF’s stock launch.
This was the highest percentile among the Financial sector followed by East West Banking
Corporation, of which 81.82% of competitors’ stock prices were affected by IPO (Table 2). The
remaining two banking institutions, Philippine Business Bank and Asia United Bank, had results
of 76.92% (Table 3) and 64.29% (Table 4), respectively.
In the Industrial sector, 42.86% (Table 5) of Megawide Construction Corporation’s rivals
indicated changes in their stock prices, while IPO had shown effects on half of Integrated Micro-
Electronic Inc.’s competition; 33.33% on Cirtek Holdings Philippines Corporation (Table 7);
66.67% on Philippine H2O Corporation (Table 8); 69.23% on Emperador, Inc. (Table 9);
85.71% on Del Monte Pacific Limited (Table 10); 75% on Concepcion Industrial Corporation
(Table 11); and 72.22% on Century Pacific Food (Table 12). Moreover, 40% of Crown Asia
Chemical’s rivals exhibited significant changes (Table 14), 84.62% of Philippine Shell
Petroleum Corporation (Table 15), and 100% of Phoenix Semiconducter Philippines Corp.
(Table 13) which was the highest overall.
It was confirmed that IPO has an effect on the stock prices of rivals in the industry demonstrated
by the 22 out of 32 companies or 68.75% that experienced changes as a result of GT Capital
Holding’s going public. 73.33% of Top Frontier Investment Holding Inc.’s rivals also faced
stock price changes.
75.76% of Double Dragon Properties Corp. and 58.82% of 8990 Holdings Inc.’s rivals in the
Property sector changed with respect to their stock prices. Additionally, a third of IP E-Game
Ventures, Inc.’s competitors and 83.33% of Cebu Air, Inc. in the Service sector also encountered
stock price fluctuations.
In the Mining and Oil sector, results were also visible that 43.75% of Century Peak Metal
Holdings Corporation’s rivals were affected by IPO; 52.94% of Nickel Asia Corporation;
58.82% of Coal Asia Holdings Incorporated; 25% of PXP Energy Corporation; and 20% of
Trans-Asia Petroleum Corporation. Lastly, Italpinas Development Corporation in the Small and
Medium-Sized Enterprises showed a 100% outcome.
The findings of the study indicate that the IPO of one player in an industry effects changes in the
stock prices of the other players. There are significant differences between the stock prices one
month prior to the IPO and one month subsequent to the event. Therefore, the hypothesis that
initial public offering (IPO) has no significant impact on the stock prices of rival companies is
rejected. The computed mean, standard deviation, and p-value are provided in the Appendix
section.

5. Conclusion
This paper assessed the effect of initial public offering (IPO) on the stock prices of rival
companies in the Philippines. It aimed to determine whether the IPO could be a possible catalyst
of stock price fluctuations by observing and calculating the difference between the stocks
quotations one month price and subsequent to stock launch date.
The results disclosed a major finding: the IPO of companies in the Philippines has significant
impact on the stock prices of their rival companies.
The paper partially presented the effects of IPO on the stock prices of industry rivals. Limitations
exist as a consequence of selecting only sample units from the population of listed companies
whose stock launch or IPO happened during 2007 onwards. Furthermore, it assumes that no
other internal and external factors affected the changes in the stock prices of competitors during
the time of study. Future researchers are encouraged to address the aforementioned problems to
come up with more accurate conclusions.

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