New kid on the block

Abstract: We analyze the effect of completed initial public offerings (IPOs) on listed industry peers around the time of an IPO within the same industry, in the Swedish market. Providing evidence that industry peers experience negative stock price reaction, in relation to a comparable index, in the period before the IPO. After the IPO however, we do not find any significant results about the incumbent peers' stock price reactions, in relation to the index or to that of the IPO itself. Further, our thesis provides evidence that the stock price of peers correlates with the index movements before and after the IPO, as well as correlating with the stock price of the IPO in the period after its completion. Our results are consistent with the existence of IPO underpricing and IPO related competitive advantages. Other mechanisms such as uncertainty, fund flows and market cyclicality are extensively discussed to explore how the IPO, the new kid on the block, affects the market.