Initial public offerings : an empirical study of how the IPOs on Oslo Stock Exchange are priced relative to the indicative price range

Abstract

This thesis investigates Initial Public Offerings (IPO) on Oslo Stock Exchange between 2006 and 2011. The analyses examine how the IPOs are priced relative to the indicative price range, and how this affects the performance. In addition, the effect of a previous listing in the OTC-market, issue size and the use of a Green Shoe Option (GSO) have been examined. Based on my analyses I find the average market adjusted initial return to be marginally positive, and it seems to decline in the longer run. When investigating how the IPOs were priced relative to the indicative price range I find the majority to be priced in the lower part of the range. I also observe that small bookbuilt IPOs and IPOs sold without a GSO more frequently were priced below the midpoint of the range. The analysis indicates that IPOs priced in the upper part of the range perform better in the aftermarket. The regression analyses suggest that both private and public information are only partially incorporated into the issue price. My results indicate that companies previously listed in the OTC-market and large issues experience less fluctuation after the introduction. Furthermore, every IPO using fixed-price was characterized as small. Finally, I find that fixed-price was more often used among former OTC-listed companies.