Selling state-owned enterprises to the private sector has become a popular policy for governments all around the world. Chapter 1 provides an historical perspective on privatization, and it describes the objectives and the privatization techniques that have been adopted by many governments since the late 70s. The chapter then focuses on two important issues in the privatization debate, the underpricing of shares and the effect of ownership on performance. It reviews the most significant theoretical and empirical contributions to the analysis of these two issues, and it introduces the questions addressed in the remaining chapters of this dissertation. In Chapter 2 I consider a government that first privatizes a company and then competes for votes against a political opponent. The government's objective is to choose the price of shares and the level of promotional effort to maximize its total net revenues. After the sale of the company to the public there is an election and the two parties announce what expropriation rate they would implement if they win the political competition. I show that in this context it is optimal for the party in power in the first period to actively promote the sale and to underprice the stock with respect to its true value, in order to increase the size of the shareholders' interest group that will vote for the party announcing a low expropriation rate. In Chapter 3 I estimate the long-term impact of the British privatization program of the 70s, 80s, and 90s, on the government's finances. For a large sample of British companies that were privatized in the years 1979 to 1994, regression analysis shows no effect of change in ownership on company's gross profitability. This information is then combined with estimates of all relevant costs (implicit and explicit) and revenues for each sale, to assess the long-term effect of the privatization policies on the government's net worth. The results show that "Selling the State" generated considerable losses for the British Government. / Ph. D.

The pricing of Initial Public Offerings (IPOs) is an area of interest to practitioners and academics alike given the empirical regularity of investors in IPOs making very large first day returns. These first day returns are as a result of share underpricing. Academics have explained the underpricing phenomenon in terms of ex ante uncertainty, namely the risk of pricing, off take and issuing of such shares. In an attempt to predict the degree of the phenomenon much work has been done in linking underpricing to company, issue and market related factors that are known prior to the listing (ex ante as opposed to ex post information). In the case of junior mining companies, underpricing is exacerbated by a lack of financial information making these issues difficult to value since such unseasoned companies have no past earnings history on which to base predictions of future earnings. Given this context, this study identified relevant factors from secondary sources which could be used to proxy the level of ex ante uncertainty and therefore correlate with the degree of underpricing. The analysis firstly sought to ensure that underpricing exists for the issues, market and time period of interest. Secondly the presence of a “hot issue” period (Ritter, 1984), which is exclusive to the natural resources sector, was investigated. Finally the relationship between underpricing and the relevant factors was explored using hypothesis testing about means and regression analysis. It was found that underpricing does indeed exist for junior mining listings on the Toronto Venture Exchange (TSX-V) between 2005-2007. This said no evidence of the “hot issue” period could be found. In terms of linking company, issue and market related factors to the degree of underpricing this study failed to identify any significant predictors. It is argued that junior mining listings on the TSX-V may be a special case since some of these factors have successfully been used, by other researchers, to predict the degree of underpricing of mining IPOs. The fact that junior mining IPO’s listed on the TSX-V show a constant degree of underpricing over time implies that investors do not build market specific factors (market sentiment and commodity price) into the listing price. Rather investors seem to demand a constant degree of underpricing regardless of the market situation to compensate them for the “unknown” exploration risk. / Dissertation (MBA)--University of Pretoria, 2011. / Gordon Institute of Business Science (GIBS) / unrestricted

When a company decides to sell their shares to the public for the first time it is called an initial public offering. For quite some time, the literature on the subject has come to the conclusion that the companies going public often undervalue their share price prior to the initial public offering resulting in an abnormal positive return on the first trading day, also known as initial public offering underpricing.  This thesis aims to study whether initial public offering underpricing occurred in the Swedish markets during the selected time period of 2000-2022. The thesis also seeked to find whether there was a significant difference in underpricing depending if the company was listed on OMX Stockholm or First north growth market. Further, with the help of previous research on the topic, a few independent variables were retrieved and later regressed against the initial return on the first trading day and thus seeing if these variables explains if a company will see an increase in the share price on the first trading day or not. The independent variables collected were age of the company at the time of the initial public offering, deal size, the market the company was listed on and lastly the year the company was listed on the stock exchange. The study concluded that there was a significant underpricing in Swedish initial public offerings during the studied time period with an average first day initial return of 12.56%. However, the thesis further concluded that neither of the independent variables studied had a significant effect on the initial return on the first trading day. Neither could the thesis conclude that there was a significant difference in underpricing between the two studied markets, although, the sample from OMX Stockholm saw an average underpricing of 11.09% whilst first north saw an average underpricing of 13.79%.

The IPO market in Sweden has been on the rise and has had years of record in number of companies that has gone public. The phenomenon of underpricing has been analyzed for years in different markets as well as in different time periods. This thesis analyzes the factors affecting underpricing during the years 2017 to 2022 on the markets: Nasdaq Stockholm, First North Stockholm and Spotlight. Additionally, an investigation of the underpricing between the industries have been done by using several control variables to determine the differences in underpricing between the industries. Various tests use a sample size of 366 companies to determine if the variables have a statistical significance. The results show that the average IPO during the time period is underpriced by approximately 9%.

The closing price first day of trading has historically been found to exceed the offer price set in IPOs, implying that many issuing firms tend to leave money on the table in their IPO. This thesis examines the level of IPO underpricing in Sweden using unique data of IPO transactions on the largest Swedish stock exchanges during 2010-2016. It further discusses the valuation difficulties using the most common valuation methods for firms exhibiting characteristics commonly shared by technological firms. Univariate and multivariate tests confirm the existence of underpricing on Swedish stock exchanges during the period of study. Firms in the technological sector are found to experience both high average levels of underpricing and great variance in initial returns, suggesting potential difficulties valuing technological firms. Robust univariate tests do however not yield a significant result of greater variance in initial returns compared to rest of the sample. By using regression analysis, I find capital raised relative to market capitalization to have significant negative effect on initial returns.

No / The paper examines the determinants of stabilization and its impact on the aftermarket prices. We use a unique dataset to relax several assumptions in the stabilization literature. We find that underwriters support IPO prices shortly after listing, particularly in cold markets and when demand is weak. We also show that stabilized IPOs are more common amongst reputable underwriters. This finding suggests that stabilization may be used as a mechanism to protect the underwriter’s reputation. It also implies that reputable underwriters may possess private information and price IPOs closer to their true values (i.e., higher than those indicated by the weak premarket demand). Consistent with the latter view, we show that stabilized IPOs are offered at higher prices and suffer less underpricing than those indicated by the premarket demand, firm characteristics and market-wide conditions. The post-IPO performance results indicate that stabilized IPOs are unlikely to be mispriced as their prices do not exhibit any significant reversal after the initial stabilization period. We conclude that stabilization may be superior to underpricing as it protects investors from purchasing overpriced IPOs, benefits issuers by reducing the total money “left on the table” and enhances the overall profitability of underwriters.

An initial public offering (IPO) represents a significant event in a firm’s lifecycle, marking the transition from being a privately held company to a publicly traded entity by offering its shares to the public for the first time. Several previous studies have shown that, from an investor point of view, IPOs posits the opportunity to earn substantial return, and that they also tend to underperform long-term. In recent years, stock market volatility has fluctuated considerably due to factors such as the global pandemic and geopolitical conflicts. These factors have led to varying stock market returns, affecting individuals' savings. Additionally, the number of investors in Sweden has grown substantially over the past decade. This, combined with the relatively unexplored nature of market volatility in IPO research, has laid the foundation for this study's focus. Therefore, the purpose of this study is to assess the impact market volatility has on the initial return and the long-term risk-adjusted return of IPOs in Sweden.  To fulfill this purpose, analyses have been undertaken to investigate the relationship between IPO short- and long-term returns and market volatility between 2019 and 2022. This timeframe encapsulates two years experiencing low market volatility (2019 and 2021), and two years experiencing higher market volatility (2020 and 2022). The data sample consists of 165 firms when measuring short-term returns, and 162 firms when measuring long-term returns, who have all had their IPO within this timeframe and are all listed on the Swedish stock market. To further contribute to the literature, the study incorporates the Efficient Market Hypothesis (EMH), Prospect Theory, and the Winner´s Curse Theory. These are three well-established and contrasting theories within IPO research which are introduced to see how well their perspectives align with the study's findings.  The empirical results from the statistical analyses showed varied outcomes. While a statistically significant difference could be identified between certain years, the majority did not. Since the majority of the tests conducted could not find a significant difference in return between high and low volatile years, market volatility at the time of an IPO does not significantly influence the return. Consequently, the findings suggest that employing an investment strategy that involves investing in IPOs based on market volatility levels is not superior to other strategies. These findings give investors deeper insights into how IPOs and their timing are influenced by market conditions and can therefore aid them in making more informed decisions.

The thesis is a quantitative study examining the correlation between IPO underpricing andinside ownership and whether subgroups' significance has a greater effect on underpricing.The methodology of this study involved employing OLS regression analysis. Literature on IPO underpricing and ownership is primarily focused on the relationship between institutionalinvestors. Furthermore, previous literature on IPOs and ownership have been conducted onthe dilution of inside ownership post-introduction and retention rate concerning the firm's quality. The contribution of the study is to the literature on IPO underpricing and asymmetricinformation due to inside ownership. In addition to previous literature, regarding underpricingof IPOs and the asymmetric information between inside and outside ownership. The resultsindicate that inside ownership increases underpricing of IPOs and that the subgroups CEO andBoard of Directors significantly influence underpricing in the Swedish stock market. Thestudy also investigated whether underpricing was affected by insider holding during uncertainperiods such as the COVID-19 pandemic, but no evidence supporting this hypothesis wasfound.

Initial public offerings (IPO) are an important function for society to fund entrepreneurs. However, what explains the number is disputed. One may think that it should be explained by the need for capital but only a part can be explained by that. Instead, this thesis theories that the number of IPOs should be able to be explained by valuation. To test this hypothesis two variables have been thought to affect the valuation: the current market valuation and underpricing. To represent the current valuation the P/E ratio of OMXS30 was used and for underpricing the average underpricing was used. Which later was tested in a regression analysis against the number of IPOs. This study found that there exists a positive correlation between the current market valuation (P/E) and the number of IPOs. The study's result regarding if underpricing could explain the number of IPOs became inconclusive. The finding of P/E ratios correlation to the number of IPOs can in future forecasting be tested and used.

[pt] O objetivo deste trabalho é verificar a ocorrência do underpricing no mercado brasileiro e analisar sua relação com fatores internos, externos da empresa e da oferta. O underpricing é considerado uma anomalia de mercado, pois proporciona para os investidores ganhos elevados com a mesma composição de risco. Para as empresas, a ocorrência do underpricing no IPO compromete a eficiência da oferta, uma vez que reduz o montante arrecadado. Este fenômeno foi estudado nas décadas de 80 e 90, porém somente na última década estudos começaram a ser realizados com foco no mercado brasileiro. Desta forma, foi observada a ocorrência do underpricing no mercado brasileiro em uma amostra composta por 30 IPO entre os anos de 2010 a 2016, e para analisar a relação dos fatores foi aplicado a análise de cluster aliada ao teste não paramétrico de Wilcoxon. / [en] The objective of this paper is to verify the occurrence of underpricing in the Brazilian market and to analyze its relationship with internal, external factors of the company and the offer. Underpricing is considered a market anomaly as it provides investors with high returns with the same risk composition. For companies, the occurrence of underpricing in the IPO compromises the efficiency of the offer, since it reduces the amount collected. This phenomenon was studied in the 80 s and 90 s, but only in the last decade studies began to be carried out focusing on the Brazilian market. Thus, underpricing in the Brazilian market was observed in a sample composed of 30 IPO between the years 2010 and 2016, and to analyze the relationship of factors was applied to the cluster analysis allied to the Wilcoxon nonparametric test.