The Winner’s Curse Reloaded: How Public Subscription Affects IPO First-Day Returns on Hong Kong’s Growth Enterprise Market

This study revisits the winner’s curse hypothesis in Hong Kong’s Growth Enterprise Market, examining how public retail participation is associated with IPO first-day returns from 1999 to 2023. IPOs allocated through placement-only and placement plus sale methods deliver extraordinary first-day returns of 200.9% and 231.0%, while those with public subscription dropped to 32.5% and 10.5%. Regression analysis further confirms the negative correlation between retail allocation and first-day returns. The study also underscores policy implications of the 2018 reforms mandating at least 10% public allocation, which coincide with, and may have contributed to, the sharp decline in the number of Hong Kong’s GEM IPOs.