Underpricing and Long-Run Performance Patterns of Nordic Private Equity-Backed and Non-Private Equity-Backed IPOs

Abstract

This paper investigates the initial returns and long-run performance of initial public offerings (IPO) using a sample of 78 private equity-backed IPOs, 42 venture capital-backed IPOs and 199 non-sponsored IPOs in the period 2002-2015 on the four major Nordic stock exchanges. We find that private equity-backed firms outperform non-private equity backed firms in the long-run and experience less underpricing on average. The results reveal that PE-backed IPOs are larger on average, have more underwriters participating in the transaction and use a more prestigious investment bank as global coordinator. PE-backed IPOs experience more underpricing in high activity periods, but we find no evidence that PE or VC firms that sells a larger equity stake in the IPO yields lower underpricing. PEbacked firms significantly outperform their industry peers over a three-year period, but we find no evidence that firms listed in hot markets versus cold markets experience long-run underperformance as documented in previous literature.