SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

In Table 4, we further split the sample of IPOs with failures to deliver between those that
have fails on the first settlement day (Panel B) and those that have fails anytime between T+4
and T+24 (Panel C). The vast majority of IPOs in our sample have fails to deliver sometime
during the first 21 trading days. Two hundred and thirty-seven IPOs (61% of the sample) have
fails to deliver on T+3, 134 IPOs have fails to deliver between T+4 and T+24, and 17 IPOs either
have no fails to deliver or fails to deliver below 10,000 during the entire first month of trading.
The percentage of IPOs in our sample that have a failure to deliver in excess of 10,000 shares at
any time during the first month of trading (96%) is larger than that documented by Fotak, Raman
and Yadav (2009) who find that 91% of NYSE and 71% of Nasdaq stocks have at least one
failure to deliver in excess of 10,000 shares over their six-month sample period.
There is a difference between the two samples with IPOs with fails to deliver on the first
settlement day having a slightly lower mean first day return and a higher average fails to deliver
as a percent of either the shares offered or short sales. When fails to deliver do not occur on
T+3, most IPOs have fails not long after T+3 as the sample has a median first fail date of T+5.
b. Determinants of Failures to Deliver
In this section, we further examine the relation between short selling and both transitory and
persistent fails to deliver. We define an IPO as having persistent fails to deliver if the IPO is on
the Regulation SHO threshold list on the first possible date (T+7).
When a stock has a fail to deliver level of at least 10,000 shares and 0.5% of the shares
outstanding for five consecutive settlement days, the trading venue listing the stock is required to
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SEC_OEA_FCIC_002472