IPO Performance in Europe's Renewable Energy Sector: Underpricing and Long-Term Returns

Abstract

The well-documented phenomena of IPO underpricing and long-term underperformance have been widely examined across industries and time periods, yet little is known about how these patterns apply to renewable energy firms. Motivated by the growing importance of the energy transition and the substantial capital needs of clean energy companies, this thesis explores how traditional IPO dynamics manifest in this emerging sector. We investigate whether European renewable energy IPOs exhibit significant first-day under pricing, how they perform in the long run, which characteristics drive these outcomes, and how they compare to traditional fossil fuel-based IPOs. Additionally, we assess the extent to which classic IPO theories explain the observed patterns. Using a sample of 96 renewable and 83 oil & gas IPOs from 2000 to 2025, we conduct event-time abnormal return analysis and OLS regressions to analyze short- and long-term performance. Our approach is deductive, testing hypotheses derived from existing theoretical frameworks. We find that renewable IPOs display statistically significant underpricing on average, and that long-term underperformance is common, particularly among smaller and more specialized firms. However, results are benchmark- and weighting-sensitive, and we observe no consistent performance difference between renewable and oil & gas IPOs. Several classical IPO theories remain valid in this context, including information asymmetry, signaling theory, and the certification hypothesis. Our findings contribute to the IPO literature by providing empirical evidence from a relatively underexplored industry and period. They also offer insights for investors, issuers, and policy makers on how sustainability-linked IPOs behave in public markets and which characteristics shape their success.