The Post IPO Performance of Nordic High-Growth Companies

Abstract

We study Nordic high-growth IPOs, measuring firms’ ability to meet the revenue growth expectations that their offer prices imply, and estimating the relationship between growth expectations and abnormal returns. We identify implied growth expectations as the revenue growth rates that satisfy IPO offer prices in our standardized DCF model. We find that Nordic high-growth IPOs meet expectations on average, are not underpriced – having average 1st day returns of -2.1%, and do not exhibit long-run underperformance – with average annual Fama French abnormal returns of 17%. Moreover, implied growth is negatively related to 1st day abnormal returns and positively related to long-run abnormal returns. We conclude that these relationships are consistent with an initial risk adjustment and a subsequent positive performance adjustment.