The Performance of Private Equity-backed IPOs in Sweden

Abstract: This thesis examines the initial performance of private equity-backed IPOs in relation to non-private-equity-backed IPOs listed on Nasdaq Stockholm and Nasdaq First North Growth Market during the years 2011-2021. It further measures the effect of independent variables on the return after the first day- and first week of trading as well as if the first day performance impacts the first week performance. Previous research finds that IPOs in general are underpriced, and that private equity-backed IPOs tend to perform poorer than non-private-equity-backed IPOs on the first day of trading. Previous research further finds that underpriced IPOs have poor aftermarket performance since the issues usually decline during the first couple of days of trading, subsequently converging towards a lower price rapidly after listing, making it less profitable to invest in an IPO in the aftermarket. Univariate and multivariate analyses test this and the findings indicate that the first day return impacts the first week performance. It also finds that larger private equity-backed IPOs are underpriced and show poorer first day performance compared with larger non private-equity-backed-IPOs. Yet, this is not found to hold for the total sample covering all offering sizes. However, our findings cannot confirm that private equity-backed IPOs would show poorer performance compared with non-private-equity-backed IPOs after the first week of trading. Among the independent variables, the nominal offer price was found to have a significant impact on the first day return alongside with which stock exchange the company was listed on.