Langsigtede performance for Private Equity støttede IPOs relativt til ikke Private Equity støttede IPOs på det nordiske og britiske marked: Med fokus på PE-ejerskabskarakteristika og markedscyklusser

Abstract

The purpose is to determine and measure the long-term stock price performance of private equitybacked initial public offerings (IPOs) compared with non-backed IPOs through selected private equity characteristics and market cycles. The sample consist of 540 IPOs floating between 2000- 2018 at the main markets in the Nordics and United Kingdom of which 57 and 65 are private equity-backed IPOs, respectively. The study applies a combination of equal-weighted measurement methodology, an event-time approach as well as buy-and-hold abnormal returns (BHAR) and cumulative average returns (CAR) over a three-year investment horizon. To emphasize potential performance differences between private equity-backed IPOs and non-backed IPOs, the study applies three market indices and two matching-firm benchmarks. The former consists of MSCI Nordic, FTSE all-share and MSCI Europe. The latter comprise non-backed control firms matched by size and industry as well as size and book-to-market ratio. In contrast to the widespread evidence of the underperformance of IPOs in the aftermarket, new issuing firms at the main markets in the Nordics and United Kingdom appear to defy the norm since the IPOs achieve either normal- or overperformance relative to the market indices. In addition, PE-backed IPOs significantly outperform their counterparts three years after flotation in statistical tests using matching-firm benchmarks. One feature of IPOs is their tendency to occur in cohorts, which is persistent with our sample as hot markets appear between 2004-07 and 2014-18. A cross-sectional regression provides statistical evidence that yearly and industry clustering of IPOs has less impact on private equity-backed IPOs performance relative to their non-backed counterparts in the Nordics. Contrarily, especially industry clustering has a negative effect on private equity-backed IPOs abnormal return in the United Kingdom as the sponsored IPOs performs poorly in periods with industry clustering compared with non-backed IPOs. In terms of the selected private equity characteristics, the statistical evidence suggest that the leverage effect has a positive effect in the aftermarket for both IPO groups in the Nordics, however the positive effect is more vigorous for PE-backed IPOs. In United Kingdom, the leverage effect has less influence on PE-backed IPOs abnormal returns as the positive relation is only statistically significant using the size and book-to-market benchmark. Furthermore, the superior aftermarket performance of PE-backed IPOs is positively related to the proportion of the financial sponsors’ shareholdings immediately after flotation across markets, although the statistical inference is sensitive to the applied benchmark. At last, the holdingperiod of the financial sponsors before IPO has no significant relationship with PE-backed IPOs abnormal return