DuCharme et al. (2001)find that the extent of underpricing for US-based Internet ompanies is systematically related to greater levels of news exposure for the IPO candidate in a seven-day period prior to the IPO. Bhartov, Mohanram and Seethamraju(2001) find that, even for non-Internet firms, earnings were significant for valuation prior to 1999 but lost their significance as the market turned a blind eye toward financial statement information in 1999 Further, Loughran and Ritter(2000) found that the higher the expected demand for stock prior to listing, the more likely it is that issuers will accept a lower offer price because of the expected appreciation in share price once the stock is listed. When coupled with the unprecedented first day returns achieved in recent years by firms with Internet-focused business models, the findings of Loughran and ritter(2000)and DuCharme et al. (2001)suggest that stock hype may potentially be playing a significant role in explaining the underpricing in technology IPOs In this paper we argue that the concept of hype is related to the phenomenon of hot IPO markets. It has been well documented that there are pronounced cycles in the number of new issues per month and in the average initial returns per month(e.g. Ibbotson and Jaffe 1975, Ritter 1984, Ibbotson, Ritter and Sinclair 1988, Lowery and Schwert 2001). We use the word hype to capture information effects reflecting market sentiment, whether rational or irrational, in the pre IPO period. We examine the extent to which this sentiment influences underpricing during a hot IPO period Another aspect of media coverage and underpricing is the recent evidence by Demers and Lewellen(2001)that underpricing is associated with post-IPO advertising benefits. That is, the underpricing leads to increased exposure and increased website traffic. While we focus on the period prior to the IPO, Demers and Lewellen suggest that any observed underpricing in the finance market can also provide future benefits from increased exposure in the post-IPO period 2.3 CLERP, Increased Going Concern risk and Underpricing Substantial reforms to the ASX Listing Rules and the Corporations Law through the Corporations Law Economic Reform Act("CLERP Act )were implemented on September 1 1999 and have significantly improved the regulatory environment for small con raise capital from the public equity market in Australia. The prerequisite of profitability that had traditionally prevented loss-making or marginally profitable operations from accessing the asx Lower and Schwert(2001)find that the cycles in initial returns and high volumes in IPOs are predominantly driven by information learned during the registration period and argue that this is more consistent with equential learning. Lower and Schwert measure information content with reference to returns to recent similar IPO firms and the market in general, with the potential that these returns reflect a bubble rather than explain information about future prospects. In this study we consider hype'to include all potential"information'from both news sources and recent market returns. We do not attempt to distinguish between rational or irrational expectations of high future growth6 DuCharme et al. (2001) find that the extent of underpricing for US-based Internet companies is systematically related to greater levels of news exposure for the IPO candidate in a seven-day period prior to the IPO. Bhartov, Mohanram and Seethamraju (2001) find that, even for non-Internet firms, earnings were significant for valuation prior to 1999 but lost their significance as the market turned a blind eye toward financial statement information in 1999. Further, Loughran and Ritter (2000) found that the higher the expected demand for stock prior to listing, the more likely it is that issuers will accept a lower offer price because of the expected appreciation in share price once the stock is listed. When coupled with the unprecedented first day returns achieved in recent years by firms with Internet-focused business models, the findings of Loughran and Ritter (2000) and DuCharme et al. (2001) suggest that stock hype may potentially be playing a significant role in explaining the underpricing in technology IPOs. In this paper we argue that the concept of hype is related to the phenomenon of ‘hot IPO’ markets. It has been well documented that there are pronounced cycles in the number of new issues per month and in the average initial returns per month (e.g. Ibbotson and Jaffe 1975, Ritter 1984, Ibbotson, Ritter and Sinclair 1988, Lowery and Schwert 2001). We use the word ‘hype’ to capture information effects reflecting market sentiment, whether rational or irrational, in the pre￾IPO period.5 We examine the extent to which this sentiment influences underpricing during a ‘hot IPO’ period. Another aspect of media coverage and underpricing is the recent evidence by Demers and Lewellen (2001) that underpricing is associated with post-IPO advertising benefits. That is, the underpricing leads to increased exposure and increased website traffic. While we focus on the period prior to the IPO, Demers and Lewellen suggest that any observed underpricing in the finance market can also provide future benefits from increased exposure in the post-IPO period. 2.3 CLERP, Increased Going Concern Risk and Underpricing Substantial reforms to the ASX Listing Rules and the Corporations Law through the Corporations Law Economic Reform Act (“CLERP Act”) were implemented on September 1, 1999 and have significantly improved the regulatory environment for small companies seeking to raise capital from the public equity market in Australia. The prerequisite of profitability that had traditionally prevented loss-making or marginally profitable operations from accessing the ASX 5 Lower and Schwert (2001) find that the cycles in initial returns and high volumes in IPO’s are predominantly driven by information learned during the registration period and argue that this is more consistent with sequential learning. Lower and Schwert measure ‘information’ content with reference to returns to recent similar IPO firms and the market in general, with the potential that these returns reflect a bubble rather than explain information about future prospects. In this study we consider ‘hype’ to include all potential ‘information’ from both news sources and recent market returns. We do not attempt to distinguish between rational or irrational expectations of high future growth