Valuation and Underpricing of Initial Public Offerings

Evidence from Germany in Different Market Cycles

2011. Tab., Abb.; 180 S.
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ISBN 978-3-89673-583-6
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This work investigates valuation and underpricing of initial public offerings at the German stock market from 1997 to 2007.

When firms decide to complete an initial public offering (IPO) to raise new equity by issuing shares on a public stock market, their shares have to be priced to allow potential investors to be found. In almost every stock market across several countries the phenomenon of »underpricing« can be seen in the process of going public: share prices after the first day of trading are higher than the initial offering price.

The German stock market was characterized by highly different market and going public conditions during the investigated time period. This allows to empirically analyse determinants of IPO valuation and underpricing within different market cycles. The work focuses on two major research questions: influence of pre-IPO ownership structures on the level of underpricing and the willingness to »leave money on the table« as well as effects of comparable firm multiples of already publicly traded firms on IPO valuation. The analysis shows that determinants and explanations of IPO valuation and underpricing change with different stock market cycles.


Chapter I: Theory and Evidence of IPO Underpricing

Introduction – Theory and Evidence Based on Asymmetric Information Distribution – Theory and Evidence Based on Symmetric nformation Distribution – Discussion – Conclusion

Chapter II: How Do Pre-IPO Shareholders Determine Underpricing?

Introduction – Related Literature and Development of Hypothesis – Research Design – Empirical Results – Conclusion

Chapter III: Do »Herding« Effects on Firm Multiples Determine IPO Valuation?

Introduction – Related Literature and Development of Hypotheses – Research Design – Empirical Results – Conclusion



Appendix: Chapter I

Appendix: Chapter II

Appendix: Chapter III

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