This paper examines the effect of financial sponsor-backing on post-IPO accelerated selldowns, an increasingly popular exit strategy. Selldowns are defined as block trades offered by pre-IPO investors that are announced after market close and priced and allocated to institutional investors before opening the next trading day. Using a sample of 1,232 developed-market selldowns taking place between 2000 and 2016, we find that sponsor-backed selldowns have smaller discounts and greater 1-year abnormal returns compared to non-sponsored selldowns, which is in line with previous studies on IPOs. Further, we show that selldowns where pre-IPO sponsors sell their last remaining share (clean-up trade) and eliminate the share overhang have smaller discounts and less negative first-day returns, which we attribute to the market reacting positively to the removal of the overhang. The clean-up effect is shown to explain a large part of the difference in discount between sponsor-backed and non-sponsored selldowns. Additionally, our results suggest that the positive 1-year abnormal performance found in sponsor-backed selldowns decreases significantly after the clean-up trade, which supports the finding that sponsor- backing enhances aftermarket performance. Finally, we find that sponsors do selldowns at a shorter time from expiry of the lock-up provision. We also present evidence suggesting that sponsors put less emphasis on the increase in valuation after the IPO than non-sponsors do when the timing of a selldown is determined. Non-sponsors are more likely to do a selldown shortly after expiry when valuation has increased markedly since the IPO, but we find no evidence that markets react negatively to the signaling value when they do.
|Uddannelser||Cand.merc.aef Applied Economics and Finance, (Kandidatuddannelse) Afsluttende afhandling|