Nordic IPOs and Private Equity affiliation

Sammanfattning: Using a sample of 250 Nordic IPOs, consisting of private equity-backed (PE) and non-backed (NB) issues from January 2010 to March 2017, this paper examines the long-term performance of IPOs in the Nordic market. We compare and contrast the after-market performance of PE-backed IPOs to NB IPOs in an event study regime. We present raw buy-and-hold returns (BHRs) for each IPO over a holding period of three years, and calculate buy-and-hold abnormal returns (BHARs) against the FTSE Nordic market index. BHARs adjusted for industry and size are also calculated to control for robustness. Our findings are statistically significant and suggest that Nordic IPOs underperform the market three years after flotation, regardless of sub-group belonging. However, PE-backed issues perform considerably better than NB issues three years after the IPO, albeit still presenting marginally negative 36 month BHARs. Somewhat surprising is that non-backed IPOs outperform the market in the first two years after flotation, to significantly deteriorate thereafter. Moreover, the performance of IPOs seems to be related to market conditions and IPO-cyclicality. We observe that IPOs issued in years with high activity experience more negative after-market performance, which we mainly ascribe to investor sentiment and initial overvaluation.