Financial sponsors' impact on IPO underpricing: A comparison between venture capital and private equity investors

Abstract: This study examines the difference in underpricing between venture capital- and private equity backed initial public offerings (IPOs). With a sample of 361 IPOs listed on the Nasdaq Nordic main market and Nasdaq Nordic First North Growth Market between January 2011 and December 2020, we show that several firm characteristics and IPO characteristics differ between venture capital backed and private equity backed issuers. Then, we conclude that the type of sponsor backing the IPO does not impact the underpricing per se. Instead, we show that it is several firm- and IPO- characteristics that affects underpricing, and that these variables differ between the two subgroups. These results have been derived from OLS regressions and t-tests, as well as a robustness tests controlling for firm characteristics impact on the difference in underpricing between the two subgroups.