IPO Patterns in Euronext After the Global Financial Crisis of 2007‑2008

Abstract

This paper looks into the pricing patterns of 161 IPOs that occurred in 2009‑2017in theEuronext markets of Amsterdam, Brussels, Lisbon and Paris. Across all the IPOs, we finda first‑dayraw return of 1.4% and an industry‑adjustedreturn of 1.2%. After one year,the average raw returns are slightly higher (around 4.5%) and the average adjusted returnsare negative (around ‑2.7%).These first‑dayreturns are lower whilst the long‑runreturnsare higher than those reported in other studies, most notably in those that use periods thatoverlap our sample. Healthcare is the industry that presents higher initial underpricing (2.3%industry‑adjustedreturn), whilst the Technology industry presents the highest one‑yearunderperformance(‑29.5%industry‑adjustedreturn). Our findings are in line with the marketconditions and investor sentiment hypotheses according to which, when market conditionsare poor (crises), uninformed investors are not so active and optimistic in the IPO market,hence underpricing and subsequent underperformance tend to be lower. A possible explanationfor the different outcomes is that the global financial crises dampened persistently theactivity and optimism of uninformed IPO investors, even when the European stock marketand the economy in general were already recovering.