Social media analysts, investor attention, and IPO underpricing

We study the relation between social media analysts and IPO underpricing. Employing research articles posted on Seeking Alpha, we find that IPOs with social media analyst pre-IPO coverage exhibit 19 % higher initial returns than IPOs without. Social media analyst coverage stimulates attention from both institutional investors and retail investors, which associates with greater IPO underpricing. Running textual analysis, we find that only bullish research articles by social media analysts can drive up IPO underpricing, while bearish research articles have no symmetric effect on underpricing. Overall, our study highlights the prominence of social media analysts in the capital market, when the insiders and sell-side analysts are mandated to keep quiet about the IPO firms.