An Empirical Analysis of Underpricing and Oversubscription between Venture-Backed IPO and Non-Venture-Backed IPO in Italy

Abstract

Over the years, in order to meet the financial needs of companies, new forms of financing alternative to the traditional banking channel have been developed. These include the institutional investment in risk capital, which is defined by the terms Anglo-Saxon venture capital and private equity. In this empirical analysis, the divestment of the venture capitalist's participation will be emphasized by listing the invested companies in the stock market, a channel not widely used in Italy, but highly desired because of the various benefits it can bring. Analyzing the IPOs that were carried out in Italy on the main list from 2007 to 2017, we will verify what is described in the economic literature, which is that a venture capitalist, by performing a certification role, is able to reduce the information asymmetries presented in the listing process and, as a result, contain underpricing and improve oversubscription. By using the presence of a venture capitalist within the venture capital as the only variable, it has been observed that on average the underpricing and oversubscription of the venture-backed IPOs slightly differentiate from the non-venture-backed IPOs. However, the study carried out shows that this difference, although not significant, turns out to be very interesting.