A Post-IPO Reality Check for B2C SaaS : Why Consumer-Facing Software Firms Underperform After Listing

Sammanfattning

Within the B2C SaaS market, many firms enter the public market at high valuations, and yet many of them see their share prices fall below market benchmarks within the first year of trading. Such phenomena have been discussed in both international business (IB) research and finance; however, the intersection of the two fields remains underexplored. This thesis examines why twelve-month post-IPO underperformance occurs in B2C SaaS firms, and how financial, behavioral, and international-market factors interact to produce it. Throughout this paper, a mixed-methods research design combines buy-and-hold abnormal returns and wealth relatives for five firms (Zoom, Dropbox, Wix, Squarespace, and SurveyMonkey) relative to the NASDAQ Composite, with a thematic analysis of five expert interviews. Four out of five firms underperformed the benchmark, with wealth relatives ranging from 0.550 to 0.919. However, there has been one outlier, Zoom, which, lifted by the exogenous effects of the COVID-19 pandemic, outperformed the market benchmarks. The findings suggest that the observed underperformance derives from a sequence of compounding mechanisms: information asymmetry, sentiment-driven overpricing, lockup expirations, the liability of foreignness, and the Rule of 40 failure. The contributions of this study are observed through the offering of an integrated framework that bridges current IPO finance and IB theory and research, and through the identification of two underexplored mechanisms – the customer-as-investor effect and cascade selling.