IPO Underpricing in the US Technology Market During and after the Dotcom Bubble: A Transformation After the Bubble Burst?

Andreas Walz & Maximilian Nicolas Leidecker

Student thesis: Master thesis


Given the enormous amount of money left on the table in the US IPO market especially during the dotcom bubble, an increased academic interest arose for explaining those extreme numbers. This thesis contributes to the existing literature on IPO underpricing by investigating the first-day excess returns of the US technology market with a unique and current data set including 1,276 IPOs from 1995 to 2017. The analysis indicates that the US technology IPO market environment changed after the burst of the dotcom bubble in 2000. This is supported by the finding that underpricing in the form of excess returns dropped from 54% in the bubble period (1995-2000) to 18% in the post-bubble period (2001-2017). We further found evidence that the excess returns in the bubble period can be partly explained by asymmetric information theories and behavioural theories, whereas in the postbubble period none of the tested proxies of the winner’s curse - a sub-theory of asymmetric information - and none of the tested proxies of behavioural theories showed significance. On the contrary, we did not find evidence for an impact of ownership & control theories in the bubble period. In the post-bubble period, however, the ownership and control theory proxy exhibited a highly significant influence. Thus, this thesis yields new insights about explaining the excess returns in the US technology IPO market as well as about changing patterns after the bubble burst.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2018
Number of pages131
SupervisorsSøren Plesner