Did the COVID-19 pandemic (really) positively impact the IPO Market? An Analysis of information uncertainty

Ahmed S Baig; Mengxi Chen

doi:10.1016/j.frl.2021.102372

Did the COVID-19 pandemic (really) positively impact the IPO Market? An Analysis of information uncertainty

Financ Res Lett. 2022 May:46:102372. doi: 10.1016/j.frl.2021.102372. Epub 2021 Aug 10.

Authors

Ahmed S Baig¹, Mengxi Chen²

Affiliations

¹ Department of Finance, College of Business and Economics, Boise State University, Boise, ID 83725, United States.
² Department of Finance, School of Business, Central Connecticut State University, New Britain, CT 06050, United States.

Abstract

Anecdotal evidence seems to suggest that the initial public offering (IPO) market performed remarkably well through the COVID-19 pandemic. To further understand this peculiar observation, we carry out a comprehensive analysis of IPOs during the pandemic vis-a-vis IPOs before the pandemic. Our findings imply that IPOs during the pandemic experience greater information uncertainty compared to those before the pandemic, and this greater uncertainty is mainly driven by the IPOs from the high-technology and the healthcare sectors. Furthermore, we find that an average IPO firm experiences larger underpricing and more post-IPO return volatility as the pandemic and the associated government responses increase in severity before the offering. Overall, our study indicates that the COVID-19 pandemic had an adverse impact on the IPO market.

Keywords: COVID-19; IPOs; Information uncertainty; Interventions; Underpricing; Volatility.