Stilisierte Fakten von IPOs in Europa im Kontext neuer Informationen durch digitale Kommunikationswege

Tim Friedhoff, M.Sc.

Doctoral thesis

Stylized IPO Facts in Europe in the Context of New Information through Digital Communication Channels

Abstract:

The global execution of initial public offerings (IPOs) by corporations in primary financial markets is accompanied by an abundance of information, predominantly skewed towards a highly positive narrative. The purpose of generating and disseminating such information is to entice participants in the capital market to acquire as many shares as possible. In summary, this information exerts a uniform influence on both IPO stakeholders and primary market shareholders, resulting in consistent trading patterns. These patterns, in turn, give rise to distinct stylized IPO facts that can be observed regardless of the time frame or geographical location under scrutiny. These phenomena encompass IPO waves, underpricing, hot issue markets, and long run underperformance in extended periods after the IPO, each varying in magnitude across different countries and time periods. While these tendencies generally serve to maximize profits for participants in the capital market, it is important to note that variations across countries may potentially lead cross-border investors to form misconceptions regarding the unique characteristics of IPO stocks in specific nations. As the findings in existing literature are constrained to particular nations and temporal contexts, and are derived through diverse methodological approaches, this dissertation undertakes an analysis of period-specific disparities among 35 European countries. This analysis is based on capital market data spanning from 1985 to 2023, thereby enabling a comprehensive European comparison. Furthermore, this study investigates the extent to which digital methods of investor relations communication influence the behaviors of market participants. These digital means of communication engender varied information dissemination and consequently impact the prevalence of these characteristic IPO phenomena. It is posited that these phenomena manifest with greater inertia in the period between 1985 and 1998, whereas they exhibit more pronounced reactions during eras characterized by widespread Internet adoption and increased utilization of digital communication tools. Observations reveal a consistent decline in the number of IPOs across all regions during the post-test periods, leading to shallower and less frequent IPO waves. Furthermore, a uniform trend is evident across these regions, characterized by diminishing levels of underpricing. This decrease is attributed to the lower initial valuation of IPO shares and the subsequent curtailed or less frequent trading activity among market participants during the pre-IPO phase and the initial three days of trading in the secondary market. Moreover, it is worth noting that in nine out of the twelve regions under investigation, there is a heightened and sustained long run underperformance during the corresponding post-test periods. This underperformance can be attributed to the prevalence of adverse events, such as the Dot-Com bubble, the global financial crisis, the COVID-19 pandemic, the Russian conflict in which missed trades and an increased tendency to divest IPO shares by institutional and private investors can be observed.

Keywords

European IPOs, Stylized facts of IPOs, IPO waves, Underpricing, Hot issue markets, Long run underperformance, Investor relations, Digital communication, Analysis, Modelling

Language used: German

Date on which the thesis was submitted / produced: 12. 3. 2024

Thesis defence

• Date of defence: 24. 4. 2024
• Supervisor: prof. Dr. Eric Frére
• Reader: prof. Ing. et Ing. Stanislav Škapa, Ph.D., doc. Ing. Marek Zinecker, Ph.D.

Masaryk University

Faculty of Economics and Administration

Doctoral programme / field:
Finanzwesen / Finance