Initial public offerings : an empirical assessment of IPO performance in the energy sector

Abstract

This thesis investigates Initial Public Offerings (IPOs) on the Oslo Stock Exchange the last ten years (2006-2015). The analysis focuses on short- and long-term aftermarket performance between companies in the energy sector and other sectors. The energy sector is dominating the Norwegian IPO market, but few papers examine their performance. In the short run, we find an average underpricing of 3.08% for the energy sector, which is higher than the other sectors. The difference in underpricing between them is, however, insignificant. Moreover, when controlling for other variables, underpricing in the energy sector decreases. In the long run, energy companies are more overpriced compared to other companies (excluding high-tech). If the company listed is an energy company, abnormal returns decreases by 10.90%, ceteris paribus. This means that energy companies perform worse than other companies after six months of trading. Furthermore, underpricing after first-day of trading is decreasing over the sample period, and average abnormal returns are negative for most years after the financial crisis. Long-run overpricing is increasing over the period, which means that IPOs perform worse today than in previous years. However, we examine a relatively “cold” period, which may affect our results. As the IPO market is cyclical, IPOs may perform better in the future.