Underpricing of private equity backed and non-backed IPOs

Detta är en C-uppsats från Handelshögskolan i Stockholm/Institutionen för redovisning och finansiering

Sammanfattning: The aim of this paper is to contribute to the discussion on the effects of private equity ownership in general and the initial public offering underpricing conundrum in particular. In this thesis I describe initial public offering patterns, specifically I examine short-run underpricing differences between private equity backed and non-backed initial public offerings by evaluating 67 transactions between 2010 and 2017 on the Nasdaq Stockholm, out of which 35 offerings were private equity backed. Initially, I explore the mere existence of short-run underpricing on Nasdaq Stockholm. Subsequently, I investigate whether there are any underpricing differences between private equity backed and non-backed offerings and try explaining these using current research. My findings suggest that private equity backed initial public offerings exhibit lower underpricing than non-backed initial public offerings. Furthermore, I employ a model based on asymmetric information theory and find that offering size is associated with lesser degrees of underpricing. My findings suggest that when controlling for issue size, year and industry effects, the influence of private equity backing on initial public offering underpricing is reduced. These findings are consistent with previous research on US data.

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