Internet IPOs & the DotCom Bubble: Determinants of Post- Issue Performance

Abstract

This paper investigates the short-term and long-term performance of initial public offerings (IPO) within the internet industry using a sample of 596 and 572 US listings from 1996 until 2016, respectively. Internet companies exhibit a particular degree of underpricing compared to the average IPO. Besides, they tend to underperform in the long term. Whereas first-day abnormal returns are amplified for listings during the DotCom bubble, a clear effect of the event on longterm performance could not be established. Eventually, we determine different IPO characteristics to determine post-issue performance over time through continuous adjustments of the information asymmetry between issuing companies, underwriters, and investors. Keywords: IPO, Underpricing, Short-term Performance, Long-term Performance, Internet Industry, DotCom Bubble, Information Asymmetry, Private Equity, Venture Capital, Buyout