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Earnings Growth And Underpricing With Venture Capitalist Backed Initial Public Offerings
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Book Synopsis Earnings Growth and Underpricing with Venture Capitalist Backed Initial Public Offerings by : Elke J.E. Klaassen
Download or read book Earnings Growth and Underpricing with Venture Capitalist Backed Initial Public Offerings written by Elke J.E. Klaassen and published by . This book was released on 2007 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: The literature on the certification role of venture capitalists in initial public offerings (IPOs) is mixed and quite often no significant effect is found. Similarly, we find no significant effect of venture capitalists on IPO-underpricing in The Netherlands, if we study the impact of venture capitalists on all IPOs. However, underpricing is affected positively in venture capital backed companies that exhibit large net earnings growth and negatively in venture capital backed companies that exhibit small net earnings growth. The large underpricing of large net earnings growth companies suggests that informed insiders are not impressed by past net earnings of venture capital backed IPOs, but that past net earnings growth attracts less informed investors to bid fiercely for the shares after the IPO.
Book Synopsis Pricing and Performance of Initial Public Offerings in the United States by : Arvin Ghosh
Download or read book Pricing and Performance of Initial Public Offerings in the United States written by Arvin Ghosh and published by Routledge. This book was released on 2017-07-05 with total page 137 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this timely volume on newly emerging financial mar- kets and investment strategies, Arvin Ghosh explores the intriguing topic of initial public offerings (IPOs) of securities, among the most significant phenomena in the United States stock markets in recent years. Before the 2000-2001 market turndown, hardly a week went by when more than a few companies did not become public, either in the organized stock exchange or in the Over the Counter (OTC) market. In the often over-burdened, technology-heavy Nasdaq market, the role of IPOs was crucial for the market's new vigor and growth. Internet stocks were able to find a mode to supply key momentum to the market. In the so-called "New Economy" of the 1990s, it was the seductively accessible IPO that ushered in the world's information technology revolution.Ghosh sets out to examine the pricing and financial performance of IPOs in the United States during the period 1990-2001. In the opening chapter he discusses the rise and fall of IPOs in the preceding decade. Chapter 2 further delineates the IPO process from the start of the prospectus to the end of the "quiet period" and aftermarket stabilization. In chapter 3 Ghosh analyzes the mispricing and deliberately deceptive underpricing, or "flipping," of Internet IPOs. Chapter 4 delves deeper into the pricing and operating efficiency of Nasdaq IPOs. Chapter 5 analyzes the pricing and long-run performance of IPOs both in the New York Stock Exchange and in the Nasdaq markets. In chapters 6 and 7 the author deals with the pricing and performance of the venture-blocked and nonventure-backed IPOs in general and Internet IPOs in particular. In chapter 8 he analyzes the role of underwriters as market makers. In chapter 9 Ghosh discusses the accuracy of analysts' earnings forecasts. In the concluding chapter, he summarizes the principal findings of the study and the recent revival of the IPO market and its place in capital formation as well as the latest developments in t
Book Synopsis The Price of Rapid Exit in Venture Capital-Backed Ipos by : Silvia Rossetto
Download or read book The Price of Rapid Exit in Venture Capital-Backed Ipos written by Silvia Rossetto and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper proposes an explanation for two empirical puzzles surrounding initial public offerings (IPOs). Firstly, it is well documented that IPO underpricing increases during quot;hot issuequot; periods. Secondly, venture capital (VC) backed IPOs are less underpriced than non venture capital backed IPOs during normal periods of activity, but the reverse is true during hot issue periods: VC backed IPOs are more underpriced than non VC backed ones. This paper shows that when IPOs are driven by the initial investor's desire to exit from an existing investment in order to finance a new venture, both the value of the new venture and the value of the existing firm to be sold in the IPO can be partially signalled by the investor's choice of price and fraction of shares sold in the IPO. When this is the case, the availability of attractive new ventures increases equilibrium underpricing, which is what we observe during hot issue periods. Moreover, I show that underpricing is affected by the severity of the moral hazard problem between an investor and the firm's manager. In the presence of a moral hazard problem the degree of equilibrium underpricing is more sensitive to changes in the value of the new venture. This can explain why venture capitalists, who often finance firms with more severe moral hazard problems, underprice IPOs less in normal periods, but underprice more strongly during hot issue periods. Further empirical implications relating the fraction of shares sold and the degree of underpricing are presented.
Book Synopsis Venture Capital Contracting and the Valuation of High-technology Firms by : Joseph McCahery
Download or read book Venture Capital Contracting and the Valuation of High-technology Firms written by Joseph McCahery and published by Oxford University Press, USA. This book was released on 2003 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: Venture capitalists are specialized intermediaries that channel capital to firms and professional services to companies that might otherwise be excluded from the corporate debt market and other sources of private finance. Venture capital financing is used to invest mainly in small and medium size firms with good growth and exit potential. Typically, venture capital firms concentrate in industries with a great deal of uncertainty, where the information gaps among entrepreneurs and venturecapitalist are commonplace. Venture capital firms are active in sectors with a high informational opacity and agency costs. These ventures are identified as financially constrained. Start-up firms rely on venture capital as one of their main sources of funding. Recent empirical research has found that the effect of venture capital on the success of these ventures is considerable. The value of venture capital investment is borne out by the figures which show that venture capital backed-firms grow on average twice as fast as those not backed by venture capital firms. The debate on the development of an efficient venture capital market has forced us to consider which financial instruments, legal rules, labour laws, contracts, and other institutional structures are necessary to create a venture capital market. The contributions to this book have offered insights on the structure of venture capital fund financial contracts, the screening, monitoring and staging of potential investments, the importance of partnership and other legal business forms for investors and start-up firms, the funding of innovation, the valuation of investments, and the exit routes for venture capitalists. The essays in this volume, which draw upon international evidence and ideas from financial economics and law, contribute to further research on the relationship between venture capitalists and entrepreneurs. This collection analyses the main legal and contracting structures in the venture capital cycle. Exploring the differences between the US and European venture capital markets, it focuses on diverse organizational and contractual techniques, such as staged finance, convertible securities, board functions and other forms of control, and the role of exit. Theoretical chapters examine the valuation of entrepreneurial firms and the liquidiation preference in convertible securities. Finally, the book assesses the importance of the IPO market for entrepreneurs, investors and venture capitalists alike.
Book Synopsis The Rise and Fall of Europe's New Stock Markets by : Giancarlo Giudici
Download or read book The Rise and Fall of Europe's New Stock Markets written by Giancarlo Giudici and published by Elsevier. This book was released on 2004-11-10 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: The advent of new stock markets (the German Neuer Markt, the French Nouveau Marche, the Italian Nuovo Mercato and Nasdaq Europe) has been one of the most important reforms of stock exchanges in Continental Europe in the 1990s. These stock markets aimed at attracting early stage, innovative and high-growth firms that would not have been viable candidates for public equity financing on the main markets of European stock exchanges. Of these new markets, the Neuer Markt emerged as Europe's answer to NASDAQ. However, Europe's new stock markets met with only limited success. Stock prices plummeted after the ending of the stock market bubble and new markets suffered from poor liquidity, insider trading scandals and accounting frauds. This volume provides an overview of the rise and fall of Europe's new stock markets. It contains twelve papers which investigate the characteristics, the ownership structure and the market performance of companies in the short and long run. In addition this volume examines the role of venture capitalists. New stock markets offered venture capitalists an attractive exit for their investments and helped to create a more vibrant venture capital industry in Europe. The private equity market in Europe today is as large as it was just before the advent of new stock markets. As such, the need for stock markets that allow private equity investors to divest their equity stakes in growth companies continues to exist.
Book Synopsis Do Venture Capitalists Constrain or Encourage Earnings Management in Initial Public Offerings by : Suzanne G. Morsfield
Download or read book Do Venture Capitalists Constrain or Encourage Earnings Management in Initial Public Offerings written by Suzanne G. Morsfield and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether venture capitalists (VCs) provide value-added monitoring by constraining IPO-related earnings management in their portfolio firms. Finance theoretical literature is mixed as to its characterization of whether venture capitalists reduce principal-agent conflicts through their unique contracting, information collection, monitoring, and support skill/opportunity sets, or whether VCs have incentives to exploit their unique skills and proximity to firm management at the expense of other investors. Little empirical research has focused to date on identifying observable and measurable tests of specific elements of the perceived VC governance skills or incentives set on the actual market value of the firms in their investment portfolios. Earnings management around an IPO is a context where we may be able to both observe and quantify the impact of these perceived skills and incentives. Consistent with the current accounting theory of earnings management detection, we focus on a specific capital markets context where the use of inappropriate earnings-increasing discretionary accruals is expected - i.e., the initial public offering (IPO) setting. We find evidence that abnormal discretionary accruals are significantly lower and that long-run returns are significantly higher for VC-backed IPO firms relative to a matched sample of non-VC-backed IPO firms - these findings suggest that VCs behave more like principals than agents in this context. We also provide evidence that the direction of the discretionary accruals (i.e., income-increasing versus income-decreasing) is important when attempting to understand both the presence and determinants of earnings management in an IPO context. When positive and negative accruals are examined separately, VC presence is related to lower income-increasing discretionary accruals. We find no association between VC presence and income-decreasing accruals. Our results are robust to alternative variable specifications, and to controls for IPO market cycles and IPO lockup provisions.
Book Synopsis Initial Public Offerings by : Michelle Lowry
Download or read book Initial Public Offerings written by Michelle Lowry and published by . This book was released on 2017 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this monograph is to provide an overview of the IPO literature since 2000. The fewer numbers of companies going public in recent years has raised many questions regarding the IPO process, in both academic and regulatory circles. As we all strive to understand these changes in the market, it is especially important to understand the dynamics underlying the IPO process. If the process of going public is too costly or the IPO mechanism is plagued by too many conflicts of interest among the various intermediaries, then private companies may rationally choose other methods of raising capital. In a related vein, it is imperative that new regulations not be based on research focusing solely on large, more mature firms. Newly public firms have unique characteristics, and an increased understanding of such issues will contribute positively to well-functioning public markets and further growth of the entrepreneurial sector. We also provide a detailed guide to researchers on how to obtain a research-quality sample of IPOs, from standard data sources. Related to this, we tabulate important corrections to these standard data sources.
Book Synopsis Vulture Capitalists Or Virtue Capitalists? by : Linda Ann Cyr
Download or read book Vulture Capitalists Or Virtue Capitalists? written by Linda Ann Cyr and published by . This book was released on 1998 with total page 284 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Role of Venture Capital Backing in Initial Public Offerings by : Thomas J. Chemmanur
Download or read book The Role of Venture Capital Backing in Initial Public Offerings written by Thomas J. Chemmanur and published by . This book was released on 2009 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We empirically distinguish between three possible roles of venture backing in IPOs: certification, where venture-backed IPOs are priced closer to intrinsic firm value than non-venture backed IPOs due to venture capitalists' concern for their reputation; screening and monitoring, where VCs are able to either select better quality firms to back (screening), or help create such higher quality firms by adding value to them (monitoring) in the pre-IPO stage; and market power, where venture capitalists attract a greater number and higher quality of market participants such as underwriters, institutional investors, and analysts to an IPO, thus obtaining a higher valuation for the IPOs of firms backed by them. We argue that IPO underpricing is not the most appropriate measure to evaluate the role of venture backing in IPOs. Instead, we compare four sets of more direct measures between VC backed and non-VC backed (and between high-reputation VC backed and low-reputation VC backed) IPOs. The evidence strongly rejects the certification hypothesis, while finding considerable support for the market power hypothesis and some support for the screening and monitoring hypothesis. We find that venture capitalists attract higher quality market participants to the IPOs of firms backed by them, thus increasing the heterogeneity in investor beliefs about these firms, resulting in higher valuations for the equity of these firms (both in the IPO and in the secondary market immediately following the IPO).
Book Synopsis Earnings Management and Reputation of Venture Capitalists by : Wei Luo
Download or read book Earnings Management and Reputation of Venture Capitalists written by Wei Luo and published by . This book was released on 2006 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: I investigate whether earnings management in venture-capital-backed IPO firms has any consequence on reputation of venture capitalists. I document that discretionary accruals in the IPO year are negatively related to the number of new IPOs backed by the same lead venture capitalist during the lockup period, the number of new IPOs during the first year after the lockup period, and the number of new IPOs during the second year after the lockup period. In addition, I find that if there is income-increasing earnings management in the IPO year, underpricing is greater for the new IPOs backed by the same lead venture capitalist in the first year after the expiration of lockup period. But there is no significantly positive relationship between the discretionary accruals in the IPO year and the underpricing of new IPOs backed by the same lead venture capitalist in the second year after the expiration of lockup period. Overall, I find some evidence that earnings management imposes costs on lead venture capitalists.
Book Synopsis The Oxford Handbook of Entrepreneurial Finance by : Douglas Cumming
Download or read book The Oxford Handbook of Entrepreneurial Finance written by Douglas Cumming and published by OUP USA. This book was released on 2012-03-22 with total page 937 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides a comprehensive picture of issues dealing with different sources of entrepreneurial finance and different issues with financing entrepreneurs. The Handbook comprises contributions from 48 authors based in 12 different countries.
Book Synopsis Underpricing of Venture and Non Venture Capital Ipos by : Bill B. Francis
Download or read book Underpricing of Venture and Non Venture Capital Ipos written by Bill B. Francis and published by . This book was released on 2009 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we examine the premarket underpricing phenomenon within a group of venture-backed and a group of non venture-backed initial public offerings (IPOs) using a stochastic frontier approach. Consistent with previous research, we find that venture-backed IPOs are managed by more reputable underwriters and are generally associated with less underwriter compensation. However, unlike other papers in the literature, we find that the initial day returns of venture-backed IPOs are, on average, higher than the non venture-backed group. We also observe a significantly higher degree of pre-market pricing inefficiency in the initial offer price of venture-backed IPOs. Further, our results show that a significant portion of the initial day returns is due to deliberate underpricing in the premarket. We also observe that for both venture and non-venture issuers, there is a positive relationship between deliberate underpricing and the probability that underwriters provide support for the issue. This evidence is consistent with the notion that underwriters deliberately underprice the offering to reduce costs of price stabilization in the after-market.
Book Synopsis The Venture Capital Cycle by : Paul Alan Gompers
Download or read book The Venture Capital Cycle written by Paul Alan Gompers and published by MIT Press. This book was released on 2004 with total page 592 pages. Available in PDF, EPUB and Kindle. Book excerpt: An analysis of the venture capital process, from fund-raising through investing to exiting investments; a new edition with major revisions and six new chapters that reflect the latest research.
Book Synopsis Underpricing and Stock Market Performance of Venture Capital Backed IPO by : 林璟如
Download or read book Underpricing and Stock Market Performance of Venture Capital Backed IPO written by 林璟如 and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Currying Favor with Top Venture Capital Firms by : Daniel Bradley
Download or read book Currying Favor with Top Venture Capital Firms written by Daniel Bradley and published by . This book was released on 2018 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We explore the central role that top venture capitalists play in the IPO underwriting market. We argue that underwriters curry favor with Top VCs, not necessarily issuing firms, because Top VCs have the ability to direct the most business in a repeated game sense to banks that treat them well. The relationship between VC firms and investment banks extends through time and therefore incentives extend beyond the current IPO. Consistent with this view, we find that Top VC-backed IPOs are more likely to get all-star coverage regardless of analyst bank affiliation. In turn, banks providing all-star coverage are more likely to be chosen to lead the next VC-backed deal. We find a positive relationship between underpricing and all-star coverage for Top VCs, but not non-Top VCs. Top VCs tolerate higher levels of underpricing because the information momentum generated by underpricing allows them to cash out at higher prices when the lockup expires.
Book Synopsis Bubble, Crash and Recovery by : Albert Henry
Download or read book Bubble, Crash and Recovery written by Albert Henry and published by Moment LLC. This book was released on 2010-09-03 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: Walk into any hospital room and you are likely to find infusion pumps bearing the IMED or IVAC names. Stories of these companies convey themes typical of venture finance technological innovation driving higher valuations leading to a spectacular sale. (use italics in yellow/gold)These five broadly different case studies of major healthcare device companies and a biotechnology start-up to public company provide the reader with a rich cross section of business issues and answers. This book should be of interest to anyone in the health care industry, as well as to the general business reader. The cases provide a venture capitalist's and manager's view of how to start and build a company.The author was lead VC in each of these five companies. There is a detailed description of the issues and problems which occur in developing young companies to create significant value. The way problems and successes were dealt with gives the reader a broad learning experience ranging from the damage of patent infringement to being first in a market with runaway initial acceptance and learning how to keep the lead.Each of these cases comes from Henry Venture Fund investments. The reader learns how the investment opportunity was analyzed, how the investment was priced, how it was managed and directed into its product development and principal markets, and whether success or failure occurred and why. Two of the companies were sold for $400 million each, one was sold for $80 million in 22 months from founding, one declined in value by 90%, or $100 million, and was acquired and taken private and the the biotech company went public.Also included are two new biotech company descriptions which have made significant scientific discoveries. Sinapis Pharma has commenced a human clinical trial for brain trauma and stroke indications. TauTaTis is a preclinical company in Alzheimer's and Parkinson's Disease with very promising scientific data in mouse studies
Book Synopsis Capital Markets Handbook by : John C. Burch
Download or read book Capital Markets Handbook written by John C. Burch and published by Wolters Kluwer. This book was released on 2005-01-01 with total page 1458 pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital Markets Handbook, Sixth Edition is the definitive desk reference for capital market professionals and a complete resource for anyone working in the financial markets field. Written by seasoned professionals in association with the SIA, Capital Markets Handbook covers the latest developments in major securities legislation, and all aspects of documentation, underwriting, pricing, distribution, settlement, immediate aftermarket trading of new issues, compliance issues, a glossary, a bibliography, and appendices containing the full text of the primary statutes and regulations. The Sixth Edition includes coverage of new developments, including compliance issues such as: New amendments to NASD Rule 2710 ("The Corporate Financing Rule") governing underwriting compensation Updates on PIPE and Registered Direct Transactions Amendments to Rule 10b-18 governing corporate repurchase of equity securities Online Dutch auction procedures in use for the Google, Inc. IPO United Kingdom Financial Service Authority guidance on conflict of interest regarding pricing and allocation issues which have been adopted by one major U.S. investment bank Amendments to Rule 105 Regulation M concerning short selling in connection with public offerings Currency conversion in settlement of a global offering NASD Rule 2790-Restriction on the Purchase and Sale of IPO equity securities NASD IPO Distribution Manager procedures for filing with NASD Corporate Financing Proposed NASD Rule 2712 concerning allocation and distribution of shares in an initial public offering A reorganized compliance chapter in a checklist format designed to ease and enhance CEO and CFO Compliance Certification required by a proposed amendment to NASD Rule 3010 (Supervision) and the adoption of Interpretive Material 3010-1 And more
