The Aftermarket Performance of Private Equity-backed Entities: rAn Empirical Study of US IPO eturns 2010-2015

Rasmus Vogt & Nicklas Schou Lauridsen

Student thesis: Master thesis

Abstract

In this thesis we examine initial public offerings (IPO) in the US market. We focus on differences in stock performance one year after the IPO and investigate effects from private equity ownership prior to the offering. Our sample consists of 1,014 IPOs listed between 2010-2015 on the New York Stock Exchange and NASDAQ. We use widely acknowledged risk-models to adjust returns and compare abnormal returns across groups. Our results show that private equity-backed IPOs outperform other IPOs, but that IPOs in general perform worse than comparable stock. The differences in performances can be explained by operational characteristics and after adjusting for these, we can ultimately not prove causation between the differences in performance and the private equity ownership model. We also find large differences in returns and results depending on if the investor buys in at the IPO offer price or at the first day market opening price. Finally, we compare our results to similar studies, explain deviations in results and discuss the implications of our findings for investors.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages156
SupervisorsCaspar Rose