Norwegian IPOs: Pillaged by PE or Powered to Perform?

Abstract

This thesis studies the post-IPO performance of companies listed on Oslo Stock Exchange from 2000 to 2022, with a focus on whether Private Equity-backed IPOs outperform other IPOs. IPOs are divided into two groups: PE-backed IPOs and non-backed IPOs. IPOs backed by venture capital (VC) are only included in the non-backed IPOs. To address the effects of underpricing and the greenshoe option, performance is analyzed from one month after the IPO on horizons of 6, 12, and 24 months. We define 6 and 12 months as short-term, while defining 24 months as long-term. Using the Calendar Time Portfolio approach and a long-short portfolio strategy, we derive alpha values adjusted for market factors via the Carhart Four-Factor Model.

Furthermore, we analyze the individual alpha values of the IPOs using cross-sectional regressions to explore the drivers of performance differences between PE-backed and non-backed IPOs. The explanatory variables are information available at the IPO and, therefore, the findings are relevant for predictive analysis. In cross-sectional regression, we also study the impact of an IPO being VC-backed.

The results indicate that PE-backed IPOs outperform other IPOs on a 12 month term after the IPO, aligning with findings from similar studies in other markets. Additionally, IPO performance is negatively correlated with continued PE-backing after IPO for the 6 month holding period. VC-backed IPOs correlate with a weaker short-term performance compared to other, non-PE-backed IPOs, which is in contrast with US-based research, but where research results have varied across markets. An interesting observation is the concentration of observations after 2010, driven by the growth of Norway’s PE industry and the lingering effects of the financial crisis. This period will also be studied using the same methodology as for the full sample period. The results for the subsample somewhat differ from the full sample analysis, which encourages further research on how macroeconomic trends and cyclicality impact PE-backed IPOs' performance.