UK IPO underpricing and venture capitalists

Abstract We investigate the effect of pre-IPO investments by public market institutional investors (institutions) on the exit of venture capitalists (VCs). Results indicate that institutions’ pre-IPO investments reduce IPO underpricing by mitigating VCs’ reliance on all-star analysts to boost market liquidity. We conclude that institutions facilitate VC exits in the secondary market. Supporting this view, our analysis reveals that the presence of institutions allows VCs to exit with a reduced price impact in the secondary market. Consistent with the ease of exit, VCs offer fewer shares at the IPO and are more likely to invest in institutionally backed startups.

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UK IPO Underpricing: Venture Capitalists, High-prestige Underwriters and the Bubble Period

SSRN Electronic Journal ◽

10.2139/ssrn.675101 ◽

2005 ◽

Author(s):

Leon Hadass ◽

Jerry Coakley ◽

Andrew Wood

Keyword(s):

Venture Capitalists ◽

Ipo Underpricing ◽

High Prestige

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Revisiting The Certifying Role Of Financial Intermediaries On IPOs

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v28i5.7242 ◽

2012 ◽

Vol 28 (5) ◽

pp. 1017 ◽

Cited By ~ 4

Author(s):

Kyojik Song ◽

Young-Soo Choi ◽

Jong Eun Lee

Keyword(s):

Venture Capital ◽

Commercial Banks ◽

Small Firms ◽

Investment Banks ◽

Venture Capitalists ◽

Bank Debt ◽

Ipo Underpricing ◽

Partial Adjustment ◽

Complementary Role

This paper re-examines the role of commercial banks, investment banks, and venture capitalists in monitoring and certifying the value of the firms that went public in the 2000s. We find that investment banks that have better reputations are associated with larger underpricing for venture-capital-backed IPOs, but not for non-venture-capital-backed IPOs. The partial adjustment phenomenon observed in Carter et al. (2001) exists only for venture-capital-backed IPOs. The presence of venture capital is inversely related to IPO underpricing only when venture capitalists certify small firms. We do not find that the presence of bank debt reduces IPO underpricing. In addition, we do not find any substitutive or complementary role between commercial banks and venture capitalists in certifying IPOs.

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Sinners or Saints? Top Underwriters, Venture Capitalists, and IPO Underpricing

SSRN Electronic Journal ◽

10.2139/ssrn.3245657 ◽

2018 ◽

Author(s):

Kose John ◽

Anzhela Knyazeva ◽

Diana Knyazeva

Keyword(s):

Venture Capitalists ◽

Ipo Underpricing

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Can Venture Capital Be a Curse?

The B E Journal of Economic Analysis & Policy ◽

10.2202/1935-1682.2505 ◽

2010 ◽

Vol 10 (1) ◽

Author(s):

George Kanatas ◽

Christodoulos Stefanadis

Keyword(s):

Social Welfare ◽

Venture Capital ◽

Venture Capitalist ◽

Venture Capitalists ◽

Ipo Underpricing ◽

Capital Services

Abstract We show that partnering with venture capitalists may be a curse to entrepreneurs in that it reduces their profits in the commercialization phase. Agents rationally infer that a likely reason an entrepreneur who has received managerial assistance (from a venture capitalist) refrains from a lucrative IPO and instead opts for an acquisition may be the low quality of his technology (which is unfixable), rather than of his management (which may be fixable). This leads to lower acquisition prices and greater IPO underpricing. From a social welfare standpoint, venture capital services are under-utilized and technologies are under-commercialized.

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