Navigating the Storm: An examination of IPO Underpricing in 21st Century Crises

Sammanfattning: IPO underpricing is a phenomenon studied by many, with theories explaining the reason for this mispricing problem. However, there is little to no research examining how IPO underpricing reacts to different crises during the 21st century. This paper focuses on companies issuing in the US market on NYSE and NASDAQ. The data set contains the period from January 1999 to September 2023 and explores four modern crises, Dot.com bubble, Global Financial Crisis, Covid-19 crisis and the crisis associated with the Ukraine invasion. We show that there is no significant positive correlation between general crises and IPO underpricing however we reach the result that Covid-19 exhibits a significant positive correlation with average monthly initial returns and its standard deviation, showing that during this period the IPOs tend to be lower priced, and their average return are very volatile. We thus conclude that there is no general correlation between crises and underpricing but there can be in specific crises.