The Reality of IPO Performance: An Empirical Study of Venture-Backed Public Companies

Yochanan Shachmurove

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: The incredible profits of Initial Public Offerings have often been emphasized in the media as a popular investment for the public. This paper takes a few steps towards refuting such an assertion by investigating the performance of 2,895 venture capital backed IPOs between 1968 and September 1998. The paper finds that it is incorrect to assume that investors demand very high annualized and cumulative rates of return to compensate for the risks they are taking by financing ventures in different sectors of the economy. The mean rates of return are found to be, in practice, very moderate, and often, negative.

Keywords: Initial public offering; venture capita; annualized and cumulative rates of return; Information Technology; Medical, Health and Life Science; Non-High Technology; Biotechnology; Communications; Computer Industry; Semiconductor and Other Electronics Industries (search for similar items in EconPapers)
JEL-codes: C12 D81 D92 E22 G12 G24 G3 M13 M21 O16 O3 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2004-07-01
New Economics Papers: this item is included in nep-cfn and nep-ino
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:04-030

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