Publication
Title
How do investment banks value initial public offerings (IPOs)?
Author
Abstract
We investigate the valuation and the pricing of initial public offerings (IPOs) by investment banks for a unique dataset of 49 IPOs on Euronext Brussels in the 19932001 period. We find that for each IPO several valuation methods are used, of which Discounted Free Cash Flow (DFCF) is the most popular. The offer price is mainly based on DFCF valuation, to which a discount is applied. Our results suggest that DDM tends to underestimate value, while DFCF produces unbiased value estimates. When using multiples, investment banks rely mostly on future earnings and cash flows. Multiples based on post-IPO forecasted earnings and cash flows result in more accurate valuations.
Language
English
Source (journal)
Journal of business finance & accounting. - Oxford
Publication
Oxford : 2009
ISSN
0306-686X [print]
1468-5957 [online]
Volume/pages
36:1/2(2009), p. 130-160
ISI
000263601200006
Full text (Publishers DOI)
Full text (publishers version - intranet only)
UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 25.02.2009
Last edited 16.05.2017
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