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Underpricing Of Venture And Non Centure Capital Ipos
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Book Synopsis IPOs of Venture Capital Backed Ventures by : Christian Mehrer
Download or read book IPOs of Venture Capital Backed Ventures written by Christian Mehrer and published by GRIN Verlag. This book was released on 2003-11-02 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Studienarbeit aus dem Jahr 2002 im Fachbereich BWL - Investition und Finanzierung, Note: 1,3, European Business School - Internationale Universität Schloß Reichartshausen Oestrich-Winkel (-), Veranstaltung: Seminar des Wahlpflichtfaches Finanzierung und Banken, Sprache: Deutsch, Abstract: The topic of this paper is the difference of venture capital (VC) backed initial public offerings (IPOs) and non backed IPOs and the share price performance of the companies after the IPO. Compared to non-backed IPOs, VC backed IPOs consist on average of younger and less profitable firms. Nevertheless, VC backed companies have better underwriters, more institutional investors and less underpricing (i.e. a discount on the initial share price due to asymmetrical information). It is therefore considered that the venture capitalist (VCist) has an important impact on the share price performance of the young firm due to his certification role. By screening and mentoring the backed venture in earlier stages of the VC cycle, he can well assess the business’ opportunities. Thus, if he invests in the venture and keeps shares after the IPO, he can proof credibility to other investors (credibility hypothesis). However, younger VCists tend to bring companies too quickly to the stock markets, because they need an IPO for building up a reputation (grandstanding hypothesis). This may be adverse to the venture. Our findings also outline that there is no clear advantage of VC-backed firms on the long-run. Thus, we conclude that it is not only important to think about a VC backing, but also about the VCist that is backing. Choosing the wrong VCist may even have a negative impact on the company’s future.
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 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 Underpricing of Venture-backed and Non Venture-backed IPOs by : Stefanie A. Franzke
Download or read book Underpricing of Venture-backed and Non Venture-backed IPOs written by Stefanie A. Franzke and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Underpricing of Venture and Non Venture Capital IPOs by : Bill Francis
Download or read book Underpricing of Venture and Non Venture Capital IPOs written by Bill Francis and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Underpricing of Ipos and the Certification Role of Venture Capitalists by : Tilo Kraus
Download or read book Underpricing of Ipos and the Certification Role of Venture Capitalists written by Tilo Kraus and published by . This book was released on 2002 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyses the underpricing of IPOs and the role of venture capitalists in solving the underpricing problem for a data set of 124 venture capital backed and 184 non-venture capital backed companies that went public on Germany's Neuer Markt between March 1997 and May 2001. The slightly mitigated underpricing of venture capital backed IPOs becomes insignificant after controlling for ex-ante uncertainty and underwriter reputation with an interactive dummy variable approach. The two groups of companies do not differ either with respect to their risk characteristics or with respect to the reputation of the underwriter. However, venture capital backed companies that are underwritten by top banks seem to be underpriced more than their non-Venture Capital backed counterparts. Similarly, the impact of a similar level of ex-ante uncertainty on underpricing appears to be much weaker for venture capital backed IPOs. Therefore, this study provides evidence for different investor-perceptions of venture capital backed companies and supports a competitive rather than complementary interaction of venture capitalists and underwriters.
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 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 Underpricing of Venture and Non Venture Capital IPOs by : Bill Francis
Download or read book Underpricing of Venture and Non Venture Capital IPOs written by Bill Francis and published by . This book was released on 2000 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Grandstanding, Certification and the Underpricing of Venture Backed Ipos by : Peggy M. Lee
Download or read book Grandstanding, Certification and the Underpricing of Venture Backed Ipos written by Peggy M. Lee and published by . This book was released on 2002 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the role of venture capital backing in the underpricing of IPOs. Controlling for endogeneity in the receipt of venture funding, we find that venture capital backed IPOs experience larger first-day returns than comparable non-venture backed IPOs. Between 1980 and 2000, the average return difference ranges from 6.20 to 9.51 percent. This return difference is particularly pronounced in the quot;bubblequot; period of 1999-2000. As a potential explanation for these results, we explore a variant of the grandstanding hypothesis, in which the publicity associated with high first-day returns brings future commitments of capital to venture capitalists. Capital flow regressions show that commitments of capital are positively related to first-day returns.
Book Synopsis Two Essays on Venture Capital by : Donald Flagg
Download or read book Two Essays on Venture Capital written by Donald Flagg and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: This dissertation includes two chapters that investigate the role venture capitalists (VCs) play in the underpricing and in the long-run performance of IPOs. The first chapter focuses on the underpricing of IPOs and attempts to determine the role that VCs play in this underpricing process. The evidence is consistent with a view that VCs agree to underpricing to ascertain benefits from both "grandstanding" and "spinning." The second chapter examines the long-run performance of IPOs and tries to determine the role that VCs play in the development of IPOs. Here, the evidence suggests that VC-backed IPOs appear to have better access to capital than non-VC-backed IPOs, but the long-run performance of VC-backed IPOs is generally mixed.
Book Synopsis The Oxford Handbook of IPOs by : Douglas Cumming
Download or read book The Oxford Handbook of IPOs written by Douglas Cumming and published by Oxford University Press. This book was released on 2018-11-15 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt: Initial public offerings (IPOs), or new listings of companies on stock exchanges, are among the most important form of finance and generate considerable attention and excitement. They are used to raise capital or to monetize investments by the early generation of venture capital and other private investors. They are increasingly international in scope and reach, especially with non-American firms offering on American stock exchanges. This handbook provides a comprehensive overview of why companies list on stock exchanges, how IPOs are regulated, initially valued, and their performance in the short and long run. The first part examines the economics of IPOs, and offers statistics and regulatory insights from the United States and other countries around the world. The volume then covers mergers versus IPOs, as well as reverse mergers and special purpose acquisition companies. Part III analyzes institutional ties in IPOs, including analysts, investment banks, auditors, and venture capitalists. The fourth section provides international perspectives on IPOs from a number of countries around the world. Part V discusses alternatives to IPOs, including private marketplaces, and crowdfunding. Reflecting the range of disciplines that analyze IPOs, the contributors come from the fields of finance, international business and management, economics, and law. The chapters cover the latest information on a range of fundamental questions that are of interest to academics, practitioners, and policymakers alike.
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 Handbook of Research on IPOs by : Mario Levis
Download or read book Handbook of Research on IPOs written by Mario Levis and published by Edward Elgar Publishing. This book was released on 2013-11-29 with total page 599 pages. Available in PDF, EPUB and Kindle. Book excerpt: The chapters offer some important new insights into issues that will be of interest not only to the academic community but also to professionals involved in the preparation, structure and execution of such transactions, market regulators, and private a
Book Synopsis Underpricing of Venture and Non Centure Capital IPOs by : Bill B. Francis
Download or read book Underpricing of Venture and Non Centure Capital IPOs written by Bill B. Francis and published by . This book was released on 2000 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :Georg Rindermann Publisher :Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften ISBN 13 : Total Pages :226 pages Book Rating :4.F/5 ( download)
Book Synopsis Venture Capitalist Participation and the Performance of IPO Firms by : Georg Rindermann
Download or read book Venture Capitalist Participation and the Performance of IPO Firms written by Georg Rindermann and published by Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften. This book was released on 2004 with total page 226 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis investigates whether venture capitalists in Europe have a positive impact on the operating and long-run market performance of firms they bring public. To examine this issue a hand-collected international data set of venture- and non venture-backed IPOs at the French Nouveau Marché, German Neuer Markt, and British techMARK dating from 1996 to 1999 is used. The findings suggest that there are substantial variations in the experience and sophistication of venture capitalists. Moreover, venture-backed IPOs do not generally outperform non venture-backed issues, irrespective of the applied performance measure. Instead, merely the more experienced international venture capitalists appear to have positive effects on both the operating and market performance of portfolio firms. The overall results are interpreted as evidence for the heterogeneity of venture capitalists operating in the European market.
Book Synopsis Venture Capital and Firm Performance by : Jaeho Lee
Download or read book Venture Capital and Firm Performance written by Jaeho Lee and published by Routledge. This book was released on 2017-08-15 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides an analysis of the impact on underpricing and long-term performance of venture capital in IPOs, and of the ownership characteristics of venture capital companies. It investigates the performance of IPOs in Korea during the dot-com bubble-and-bust period. The book looks at venture capital firms and their participation, their reputation, and conflicts of interests, particularly in the context of the development of a new secondary stock market in an emerging market and these factors affect the pricing and performance effects of IPO firms. This book is a useful reference to those interested in promoting an active KOSDAQ type of stock market, and understanding how venture capitalists and their institutional affiliation may reduce information asymmetry and add value of IPO firms.
