Question

Who are anchor investors and what is anchor allotment?

Answer 1

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IIMB Management Review

Volume 29, Issue 4, December 2017, Pages 259-275

open access

Do anchor investors create value for initial public offerings? An empirical investigation

Author links open overlay panelSeshadevSahoo

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https://doi.org/10.1016/j.iimb.2017.11.004Get rights and content

Open Access funded by Indian Institute of Management

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Abstract

The concept of anchor investors was introduced by the market regulator, Securities Exchange Board of India (SEBI), to bring transparency in the book building mechanism. We examine anchor investors' investment in initial public offerings (IPOs) to determine how they create value for issuing firms and participating investors. Using a database of 135 IPOs issued in the Indian market through book building mechanism during 2009–2014, we find that anchor investors' investment in IPOs reduces underpricing. Larger subscription from retail investors for anchor-supported IPOs indicates that anchor investors' participation is viewed as a credible attestation of quality of the issue. We document that anchor-supported IPOs are more liquid and less volatile in the short run. We also find that by controlling for other factors such as offer size, subscription rate and age of the firm, a part of the underpricing is reduced by anchor investors.

Answer 2

Answer:

institutional investors who are allotted shares just before an IPO opens for subscription

Explanation:

Anchor investors are institutional investors who are allotted shares just before an IPO opens for subscription. All anchor investors are bound by a lock-in period since they get a confirmed allotment of a company's shares.