Firm Value and Stock Price of IPO Companies: Analysis of the IPO Bubble and the Relevance of Initial Price

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  • 新規公開株式の株価と企業価値―IPOバブルと初値の妥当性―
  • シンキ コウカイ カブシキ ノ カブカ ト キギョウ カチ IPO バブル ト ハツネ ノ ダトウセイ

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Abstract

<p>Undervaluation and long run under-performance out of the three puzzles related to the IPO are both resulted from the fact that the initial price is relatively higher than the offer price and consequent prices after the IPO. This paper aims to analyze which price is the closest to the theoretical price calculated with residual income model. In addition, multiple sets of cost of capital and growth rate were assumed to overcome the difficulty when estimating the theoretical value. Preliminary results using firms which went public in both 1999 and 2000 showed divergence between the initial price and the theoretical value, while there were no significant difference between the offer price and the theoretical value. This result was more significant when we focused on year 1999, which is said to be an IPO bubble period. However, if only the data of year 2000 is used, the divergence was diminished to where statistical significance was very weak.</p>

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