H1: The extent of first day underpricing of Australian technology IPOs is positively correlated with the degree of stock hype about an IPO candidate prior to listi We measure hype along two dimensions. First, we focus on the reflection of hype in the media as measured by the number of mentions a particular IPO candidate receives in the press and electronic media. Secondly, we measure the underlying sentiment of the market as reflected in recent underpricing of similar IPOs 3.2 Underpricing and the rate of Cash burn DuCharme et al. (2001)observe that the establishment of a systematic relationship between stock hype and the underpricing of technology offerings is valuable in its own right, however it does not explain why an issuing firm would leave potential IPO proceeds on the table. To this end, we examine a second hypothesis, consistent with DuCharme et al. (2001), whereby firms anticipating the need for considerable additional financing in the future to fund growth opportunities have an incentive to tolerate IPO underpricing The decision to go public typically reflects the need for additional equity capital to finance expenditures associated with future growth. Business models in the technology sector during the period we examine were frequently only sustainable to the extent that entrepreneurs were able to return to the capital markets for a follow-on offering as IPO proceeds were consumed (or burnt) This suggests that entrepreneurs, anticipating the need for considerable additional financing in the uture to fund growth opportunities, have an incentive to tolerate greater underpricing so as to leave investors with a sound impression of the firm at the time of going public. We hypothesise that the desire to return to the capital markets, proxied by the rate at which the firm burns through its IPO proceeds on operating activities, is systematically related to the extent of underpricing This suggests the second hypothesis to be examined H2: The extent of underpricing of Australian technology IPOs is positively correlated with the rate at which an IPO candidate is expected to burn cash Explanations of the cross-sectional variation in stock prices for technology firms were prevalent in the literature during the bull market of the late 1990s(e.g. Cohen 1999, Hand 2000a, Hand 2000b). Demers and lev (2001)find that an Internet firms rate of cash burn was a value driver that differed in its pervasiveness as the sector matured and shifted focus towards sustainable business models and bottom(as opposed to top) line financial statement analysis. In 1999, capital markets encouraged aggressive spending behaviour by technology firms to develop the9 H1: The extent of first day underpricing of Australian technology IPOs is positively correlated with the degree of stock hype about an IPO candidate prior to listing. We measure hype along two dimensions. First, we focus on the reflection of hype in the media as measured by the number of mentions a particular IPO candidate receives in the press and electronic media. Secondly, we measure the underlying sentiment of the market as reflected in recent underpricing of similar IPOs. 3.2 Underpricing and the Rate of Cash Burn DuCharme et al. (2001) observe that the establishment of a systematic relationship between stock hype and the underpricing of technology offerings is valuable in its own right, however it does not explain why an issuing firm would leave potential IPO proceeds on the table. To this end, we examine a second hypothesis, consistent with DuCharme et al. (2001), whereby firms anticipating the need for considerable additional financing in the future to fund growth opportunities have an incentive to tolerate IPO underpricing. The decision to go public typically reflects the need for additional equity capital to finance expenditures associated with future growth. Business models in the technology sector during the period we examine were frequently only sustainable to the extent that entrepreneurs were able to return to the capital markets for a follow-on offering as IPO proceeds were consumed (or ‘burnt’). This suggests that entrepreneurs, anticipating the need for considerable additional financing in the future to fund growth opportunities, have an incentive to tolerate greater underpricing so as to leave investors with a sound impression of the firm at the time of going public. We hypothesise that the desire to return to the capital markets, proxied by the rate at which the firm burns through its IPO proceeds on operating activities, is systematically related to the extent of underpricing. This suggests the second hypothesis to be examined. H2: The extent of underpricing of Australian technology IPOs is positively correlated with the rate at which an IPO candidate is expected to burn cash. Explanations of the cross-sectional variation in stock prices for technology firms were prevalent in the literature during the bull market of the late 1990s (e.g. Cohen 1999, Hand 2000a, Hand 2000b). Demers and Lev (2001) find that an Internet firm’s rate of cash burn was a value driver that differed in its pervasiveness as the sector matured and shifted focus towards sustainable business models and bottom (as opposed to top) line financial statement analysis. In 1999, capital markets encouraged aggressive spending behaviour by technology firms to develop the