Initial return of Scandinavian public offerings

Nadia Christiansen

Student thesis: Master thesis


The purpose of this thesis is to examine, if there have been underpricing of IPOs in Scandinavia from 2002 to 2010, and to verify if there are properties in these IPOs, that can help predict higher or lower underpricing, and if these properties can be used to give recommendations to investors in order to make a high initial return from investing in IPOs. The properties of the IPOs are analyzed by testing 8 hypotheses. These 8 hypotheses are both testing for properties about the market at the time of the IPO and properties about the company performing the IPO. The thesis finds average underpricing of Scandinavian IPOs of 4%, where underpricing is 2% in Norway, 5 % in Sweden and 10% in Denmark. The test of the hypotheses finds no clear tendency between underpricing of IPOs in Scandinavia and volatility in the market prior to the IPO, the size of the company, the age of the company, the industry the company operates in and the offer method. There is found to be significant higher underpricing in periods with high IPO activity, and when the industry index is performing better than on average. These findings can help investors, when to invest in IPOs. But since there could be found no properties about the specific company, and since average underpricing in Scandinavia in this sample is moderate, these findings are not considered useful for investors. The markets investigated are small and therefore the data sample only consists of 98 IPOs. The small data sample could be the reason that many of the hypotheses are rejected. The underpricing found in this thesis is much lower than earlier findings - both in foreign countries and in Scandinavia. This is found to be due to many cold years in the analysis and more accurate pricing of Scandinavian IPOs.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2011
Number of pages82