The performance of Nordic private equity-backed IPOs: An empirical study on underpricing and aftermarket abnormal returns

Sammanfattning: Using a sample of 267 Nordic IPOs, consisting of 62 private equity-backed issues and 205 non-sponsored issues between January 2001 and May 2017, we investigate the level of underpricing and aftermarket abnormal returns for all IPOs and the two subgroups. We test the level of underpricing by regression, on an equally-weighted and value-weighted basis, with five explanatory variables. We employ two abnormal return metrics, cumulative abnormal returns and buy-and-hold abnormal returns, over a 36-month event window to test the aftermarket performance. In addition, we test for differences between private equity-backed IPOs and non-sponsored IPOs. Our results indicate that the level of underpricing can be explained by the market capitalization of the IPO, and to some degree by the number of days between the announcement date and trading date, the percentage of shares kept by the pre-IPO owners and level of IPO market activity during the time of the IPO. We find that the entire sample, and non-sponsored issues as a subgroup, have statistically significant positive aftermarket cumulative and buy-and-hold abnormal returns on a value-weighted basis, but not on an equally-weighted basis for any group. Finally, we find no support for differences in underpricing or aftermarket abnormal return between private equity-backed issues and non-sponsored issues.