IPO Comparison: Traditional Industry vs. IT Industry

Abstract

After the IT boom that took place in 1998–2000 a natural assumption would be that IT IPOs provided higher initial returns than Traditional industry IPOs. Findings of this master’s thesis argue that the IT IPOs were priced in the same manner as the Traditional industry IPOs; the risk – return relationship was clearly considered. The data comes from Finnish markets and includes totally 56 IPOs. The first trading day and one year IPO returns are measured by calculating the difference between the offering price and the first trading day’s closing bid and the difference between the offering price and the share price year after the IPO. Findings suggest that there is no significant difference between the pricing of IT IPOs and Traditional industry IPOs, anyhow the IT IPO’s initial and one year IPO returns were relatively more scattered than the Traditional returns.