The Role of Private Equity in IPOs during COVID-19: A comparative analysis of the markets in USA and Europe

Abstract

This study investigates the influence of Private Equity backing on IPO underpricing and long-term performance before, during, and after the COVID-19 pandemic in Europe and the US from 2009 to 2024. Using a dataset of 5,255 IPOs, we find that PE-backed IPOs exhibit lower underpricing and underperformance than VC-backed IPOs, though not when compared to non-sponsored IPOs. IPOs during the pandemic show higher underpricing and underperformance. We conclude that while PE-backed IPOs perform better than VC-backed ones, the pandemic significantly impacted IPO performance across all categories.