How do IPOs and SPACs differ in terms of post-listing performance, and how do insider and institutional ownership affect these differences?

Sammanfattning: Initial Public Offerings (IPOs) and Special Purpose Acquisition Companies (SPACs) are the two most prevalent alternatives for firms seeking to list on the stock exchange, which we examine in this study. We study numerous parameters impacting the abnormal returns of IPOs and SPACs and, compare their performance in the short-term and long-term using regressions and current literature to explain the discrepancies. Building on the theory of IPO underpricing as proposed by Ritter (1991), we attempt to explain the difference in performance between SPACs and IPOs through the principal-agent problem by using insider and institutional investments as our proxy. The initial hypothesis being that SPACs have lower abnormal returns than IPOs, and that both insider and institutional ownership positively correlates with abnormal returns. The data gathered support some of these hypotheses by indicating a positive and statistically significant relation between ownership and abnormal returns, as well as first trading day return, and also indicating that SPACs have a statistically significant worse performance than IPOs, indicating investor skepticism and doubt about the target acquisition process. When compared to IPOs, SPAC-issued equities display different features and have lower abnormal return on their first trading day and in the long-term according to our findings. Our examination of SPACs reveals divergent effects of insider and institutional ownership on abnormal returns. Surprisingly, higher rates of insider ownership are related to lower abnormal returns, whereas higher rates of institutional ownership are associated with higher abnormal returns which is more in line with earlier research on ownership and stock performance. Furthermore, we found that the offering sizes are associated with first trading day returns, signaling investor interest and potential underpricing. Our analysis of SPACs and IPOs show that insider and institutional ownership have different correlation with abnormal returns, and that SPACs and IPOs both suffer from the principal-agent problem although to different extents. Insider ownership is related to lower abnormal returns, whereas institutional ownership is associated with higher abnormal returns.