The Impact of Financial Sponsors on IPO Performance : A Quantitative Study of the Effects of Venture Capital and Private Equity on European IPOs

Sammanfattning

The IPO is one of many uncertain events for a company on the stock market, often attracting many investors trying to make a profit. The complexity of valuing companies going public, due to a lack of history, increases the risks for those investors, leading to potentially large losses or gains during the first year, which is why investors need to adopt new strategies when valuing companies going public. This thesis investigates the impact of pre-IPO ownership structure on post-IPO stock performance and volatility during their first year for listed firms in Europe between 2021 and 2024. The thesis analyzes three different dimensions: stock returns, volatility (total and idiosyncratic), and portfolio diversification effects. This approach aims to address the research question “What is the effect of pre-IPO ownership structure on post-IPO volatility and stock returns in Europe?” The thesis adopts a positivist, deductive, and quantitative approach as the methodology, with a sample size of 180 European IPO in the larger samples. The research employs univariate Welch two-sample t-test, multivariate OLS regressions, robustness checks, and risk-adjusted performance metrics to analyze the distinction between VC-backed and PE-backed companies. The findings confirm that there is a significant difference between VC-backed and PE-backed companies regarding stock returns within the first year after issue, no significant difference between them regarding volatility within the first year after issue, and that there is a significant positive diversification effect, reducing the volatility when investing in both financial sponsors, rather than investing in either type alone.