An Empirical Analysis of Underpricing and Oversubscription between Venture-Backed IPO and Non-Venture-Backed IPO in Italy

Abstract

Over the years, in order to meet the financial needs of companies, new forms of financing alternative to the traditional banking channel have been developed. These include the institutional investment in risk capital, which is defined by the terms Anglo-Saxon venture capital and private equity. In this empirical analysis, the divestment of the venture capitalist's participation will be emphasized by listing the invested companies in the stock market, a channel not widely used in Italy, but highly desired because of the various benefits it can bring. Analyzing the IPOs that were carried out in Italy on the main list from 2007 to 2017, we will verify what is described in the economic literature, which is that a venture capitalist, by performing a certification role, is able to reduce the information asymmetries presented in the listing process and, as a result, contain underpricing and improve oversubscription. By using the presence of a venture capitalist within the venture capital as the only variable, it has been observed that on average the underpricing and oversubscription of the venture-backed IPOs slightly differentiate from the non-venture-backed IPOs. However, the study carried out shows that this difference, although not significant, turns out to be very interesting.

Performance of IPOs - A Detailed Analytical Study of IPOs During 2015-20

“…As shown in table 4. 15, we can see the mean ARR stood at 416% through to the 2nd month and almost 60% through the half year mark, implying a good run in the market. Though the median for the ARRs even though positive, still stayed quite low, owing to a majority of firms underperforming severely, which further leads to an inference that the product firms failed to get much limelight in order to catch the investor's eye.…”

Cultural Values, Economic Growth, and International Ipo Underpricing: Evidence From Chinese Companies

“…Second, these listing markets have experienced different economic developments and growths. Economic growth plays an important role on IPO activity and investor perceptions (La Porta et al, 1997;Gupta et al, 2018;Meluzín et al, 2018;Rija, 2019). Thus, the moderating effect of economic growth on the relationship between culture and IPO underpricing are demonstrated, thereby supplementing to the existing IPO underpricing literature.…”

“…Therefore, economic growth also plays an important role in the stock markets, and has an effect on IPO activity (La Porta et al, 1997;Gupta et al, 2018;Meluzín et al, 2018). The prosperity economy contributes to "hot issue" markets (Ritter, 1984), which are characterized by less frequent price deviations (Lim & Brooks, 2010), high IPO volumes (La Porta et al, 1997;Gupta et al, 2018), and high levels of initial return (Ritter, 1984;Rija, 2019). This study proposes that economic growth adjusts the effect of cultural values on IPO underpricing.…”

“…Furthermore, economic growth plays important role in the stock markets, and has an effect on IPO activity (La Porta et al, 1997;Gupta et al, 2018;Meluzín et al, 2018;Rija, 2019). Companies go public under favorable economic conditions that support their growth and development (Ritter, 1984;Rija, 2019), the number of IPOs is significantly correlated with GDP growth (La Porta et al, 1997;Gupta et al, 2018). Meanwhile, during the bull market, investor perception has been the major factor of IPO underpricing (Cornelli et al, 2006;Zhang et al, 2019).…”