Initial private offerings : an empirical study of the short-run performance of initial private placements on the Euronext Growth Oslo marketplace

Abstract

This thesis investigates the short-run performance of initial private placements on the Euronext Growth Oslo marketplace from 2016 until March 1, 2021. Initial private placements differ from initial public offerings (IPOs) by providing a simpler and faster way of issuing capital and list on a marketplace. From a novel data set of 74 initial private placements followed by listings, we confirm the existence of the underpricing phenomenon on Euronext Growth with an average market-adjusted initial return of 21.43% and an average market-adjusted 30-day return of 32.15%. We formulate four hypotheses about underpricing on Euronext Growth and test these using four different dummy variables and relevant control variables. A wave of new companies portraying themselves as environmentally friendly and sustainable have been listed on Euronext Growth throughout 2020 and the beginning of 2021. They are often referred to as “green” companies. We classify the sample into green and non-green companies based on the main activities presented in the information document at the time of listing. Applying regression analysis, we find that companies classified as green have significantly higher underpricing, compared to non-green companies, even when controlling for company size, age and market volatility. Our finding counters previous research that has not found underpricing effects from green energy companies when controlling for other factors. However, green companies exhibiting higher underpricing is in line with previous IPO research indicating that firms with greater ex-ante uncertainty have higher underpricing. The 30-day underpricing factor is significantly larger than the initial underpricing factor, suggesting that the “green effect” may take some time to fully materialize. We also investigate whether tech companies, hot market issues in the post-covid period or issues with cornerstone investors, are associated with higher levels of underpricing, but find no evidence that any of these factors are consistently significant on the Euronext Growth Oslo marketplace.