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We examine whether underwriters have an information advantage over other institutional investors in new public companies. Focusing on fi rms targeted by IPO ‐ related class action litigation and a matched sample of nonsued fi rms, we fi nd evidence suggesting that lead underwriters retain an information advantage in the fi rms they take public and that they capitalize on this information by closing out or reducing their holdings in sued fi rms prior to the eventual litigation date. An examination of analyst opinions suggests that analysts af fi liated with lead underwriters are reluctant to reduce their earnings forecasts or downgrade sued fi rms before the litigation date.

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