Gentlemanly capitalism revisited: a case study of the underpricing of initial public offerings on the London Stock Exchange, 1946–861

Allegations of British capital market failure are numerous, but frequently contentious. This paper revisits the literature by highlighting the post-1945 market for initial public offerings (IPOs) as a clear instance of capital market failure. Despite the tender method delivering substantially lower underpricing than the traditional fixed-price offer method, it was adopted by only one in 10 firms going public. This missed opportunity cost issuing firms between PS1.7 billion and PS3.5 billion in real proceeds forgone between 1960 and 1986, excluding privatizations, and was symptomatic of a lack of competition in equity underwriting before Big Bang.