1. INTRODUCTION We examine the economic factors determining the level of underpricing in recent initial public offerings(IPOs") by Australian technology firms during 1999 and 2000. The paper contributes to the existing literature by extending the findings of DuCharme et al. (2001)that link and a firm's need for follow-on financing. Secondly, we examine the information content or o unprecedented levels of underpricing achieved by technology firms with measures of stock hy management and accountant warnings regarding going concern issues as a signalling mechanism to mitigate ex ante uncertainty for IPO candidates(Willenborg and McKeown 2000)during a period where regulatory changes facilitated the listing of companies with high levels of inherent The volatile market conditions experienced by so called"new economy'firms in recent years have, on average, culminated in very high levels of underpricing of IPOs. KPMG reports in their 1999 capital markets survey that Australian technology stocks achieved an average level of first day underpricing of 57 per cent to issue prices. Underpricing varied within the converging business sector from a positive return of 236 per cent for Liberty One to a decline of 45 per cent for Spike Networks. Whether the high levels of valuation for technology stock offerings regarded as rationally reflecting very high growth options, or is an example of a ' hot issue market'(e.g. Ritter 1984)that reflects hypaethral(excessive, open to the sky ) expectations for future growth for these firms, the period examined provides a suitable period in which to examine the association between market sentiment and IPO underpricing. In such markets a 'hype develops surrounding the market for new issues. We view hype as a measure of the excitement surrounding a pending issue. We use the term hype' to includ excitement generated by: (1) the print and electronic media in relation to an IPO candidates listing, and(2) the hype derived from the equity markets sentiment towards public offerings by technology firms as reflected in recent offerings. DuCharme et al(2001) find that the extent of underpricing is systematically related to greater levels of news exposure for the IPO candidate in a seven-day period prior to the IPO fo sample of US-based internet companies. This paper examines the degree to which DuCharme et al's(2001)results for a narrow set of internet stocks may be generalised for a broader sample of Australian firms operating in the so called convergent business sector.Further, we expand the notion of hype as it was operationalised by DuCharme et al. (2001)to include both hype While we measure several sources of hype' we readily acknowledge that all the characteristics of hype'are clustered in a hot IPO market and can not be regarded as independent factors2 1. INTRODUCTION We examine the economic factors determining the level of underpricing in recent initial public offerings (“IPOs”) by Australian technology firms during 1999 and 2000. The paper contributes to the existing literature by extending the findings of DuCharme et al. (2001) that link unprecedented levels of underpricing achieved by technology firms with measures of stock hype and a firm’s need for follow-on financing. Secondly, we examine the information content of management and accountant warnings regarding going concern issues as a signalling mechanism to mitigate ex ante uncertainty for IPO candidates (Willenborg and McKeown 2000) during a period where regulatory changes facilitated the listing of companies with high levels of inherent risk. The volatile market conditions experienced by so called ‘new economy’ firms in recent years have, on average, culminated in very high levels of underpricing of IPOs. KPMG reports in their 1999 capital markets survey that Australian technology stocks achieved an average level of first day underpricing of 57 per cent to issue prices. Underpricing varied within the converging business sector from a positive return of 236 per cent for LibertyOne to a decline of 45 per cent for Spike Networks. Whether the high levels of valuation for technology stock offerings is regarded as rationally reflecting very high growth options, or is an example of a ‘hot issue market’ (e.g. Ritter 1984) that reflects hypaethral (excessive, open to the sky) expectations for future growth for these firms, the period examined provides a suitable period in which to examine the association between market sentiment and IPO underpricing. In such markets a ‘hype’ develops surrounding the market for new issues. We view ‘hype’ as a measure of the excitement surrounding a pending issue. We use the term ‘hype’ to include excitement generated by: (1) the print and electronic media in relation to an IPO candidate’s listing, and (2) the hype derived from the equity market’s sentiment towards public offerings by technology firms as reflected in recent offerings.1 DuCharme et al.(2001) find that the extent of underpricing is systematically related to greater levels of news exposure for the IPO candidate in a seven-day period prior to the IPO for a sample of US-based internet companies. This paper examines the degree to which DuCharme et al.’s (2001) results for a narrow set of internet stocks may be generalised for a broader sample of Australian firms operating in the so called ‘convergent business sector’.2 Further, we expand the notion of hype as it was operationalised by DuCharme et al. (2001) to include both hype 1 While we measure several sources of ‘hype’ we readily acknowledge that all the characteristics of ‘hype’ are clustered in a ‘hot IPO’ market and can not be regarded as independent factors