Can Investors Predict the Long Term Stock Performance of IPOs on the Publication of the Prospectus.

Abstract

This research aims to identify the key factors that influence the long-term stock performance of initial public offerings, focusing on information disclosed when the prospectus is made. The study analyzes a cohort of 117 companies that went public on Nasdaq First North or OMX Nasdaq between 2005 and 2021. It specifically examines whether information disclosed at the time of the prospectus release can predict long-term performance outcomes. The analysis utilizes ordinary least squares (OLS) regression to test 17 hypotheses concerning the factors affecting underpricing and long-term performance. Significant findings include the effects of the company’s primary exchange and the effect of the seller’s lock-up period on long-term abnormal returns. The study identifies several other critical determinants for long-term performance, which are significant over different investment horizons. The results highlight the complexity of factors driving IPO’s longterm success.