Complexity, Order and Underpricing: An Empirical Study of Underpricing in Technology IPOs

Abstract: Using a sample of IPOs in technology-intensive industries between 1983 and 2022, this paper studies the impact of firm-specific characteristics and actions of prior peers on the initial returns of IPOs. Three types of variables are tested to explain the reasons for the large level and variability of IPO underpricing in the technology sector identified in previous academic studies. The regression analysis is conducted through running an OLS- and a MLE regression, which is extended upon by controlling for a bubble period. The results provide further validity to the explanatory value of previously tested determinants of IPO-underpricing in literature. The study however finds insignificant explanatory power in the effect of relative timing of IPOs on underpricing yet acknowledges that underpricing is more prevalent in the Computer Equipment industry with significance, adding to the scientific discussion of which variables and firm specific characteristics affect the phenomenon.