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Finance Series: corporate-finance

The First 1000 Days in the Life of an IPO

Firms which list their shares on the pubic market should do so with the intent of using their new status for further growth. Whether they do so, and how their activities affect performance, are the bases of this study.

Author(s): Professor Scott Moeller - Cass Business School; Professor Mario Levis - Cass Business School; Dr Valeriya Vitkova - Cass Business School; Dr Naaguesh Appadu - Cass Business School; Anna Faelten - Cass Business School

What drives a firm to list on the public market? Is it to raise capital for growth, or perhaps to create currency for acquisitions? Does corporate event activity drive IPO activity or is it the other way around? Do firms follow a planned strategy or are their post-IPO activities more market-driven? Which strategy is the most successful?

This study analyses the timing and pattern of firms' corporate activities in the three years following flotation, with a focus on external events, i.e. the decision to invest (acquisition), divest (divestiture) or raise additional capital (SEO). To the best of our knowledge this is the first study that explicitly recognises and traces the activity and pattern of three of the most common types of events in the aftermarket period. By examining the underlying company characteristics, pattern and motivation behind each of the three types of events over different time periods after the IPO, we show that the drivers behind them differ not only across the three events but for each specific event over different time periods.

In addition, by showing that the aftermarket performance of IPOs relates both to the pattern and underlying motivation of their follow-on transactions, this study highlight an important dimension of the long standing debate of the IPOs aftermarket performance.

In collaboration with its research partners, Credit Suisse and Ernst & Young, the M&A Research Centre (MARC) at Cass Business School performed a study of UK IPOs between 1995 and 2008.

The full published report can be downloaded here at the MARC section of the Cass Business School website. A short registration form must be completed.

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