Long-Run IPO Underperformance on the Swedish Equity Market: - Making a distinction between Private Equity issuers and Non-Private Equity issuers

Sammanfattning: This thesis examines the long-run underperformance of IPOs on the Swedish equity market during 1992-2005 and hence includes the post IT-era. We also investigate whether there is a difference in long-run performance between IPOs that are backed by professional private equity investors and those that are not. We use a sample of in total 271 IPOs of which 89 are private equity backed. In order to investigate the abnormal performance we use two different approaches; the event-time approach as well as the calendar-time approach. Under each of the approaches we use different measuring techniques as well as weighting methods, and control for size and book-to-market ratios. Our main contribution is that we introduce the Fama-French three factor model in determining long-run IPO underperformance on the Swedish equity market. Our findings suggest that Swedish IPOs do underperform during this time period when returns are equally weighted. However this performance disappears when returns are value weighted. A deeper analysis point to the fact that especially small IPO firms performed relatively poorly in the post IT period. We also find signs that private equity backed IPOs outperform non private equity backed IPOs when returns are value weighted but not when returns are equally weighted. These results are more evident when long-run IPO returns are measured over a five year period, rather than a three year period.