Pricing and Short Run Performance of Initial Public Offerings on First North Growth Market

Abstract

Based on empirical evidence from 191 initial public offerings on First North Growth Market in Sweden, Finland, and Denmark in the years 2012 to 2020, it is found that the initial public offerings are underpriced at an average and hence provide investors with an initial return. The findings are based on a P/S and P/E multiple valuation comparison of the First North Growth Market companies and their respective sector and industry. They are furthermore based on an analysis of the underwriters performing the initial public offerings with regards to the valuation and pricing process culminating in an analysis of the initial returns provided by the First North Growth Market companies. It is, furthermore, found that First North Growth Market companies provide a sub-optimal riskadjusted return in the short run. The findings are based on a CAPM construction for each individual initial public offering along with the analysis an evaluation of Jensen’s Alpha, Sharpe ratios and Sortino ratios.