Publication

CLASHING INTERESTS IN THE IPO PROCESS: CONTINGENCIES OF SIGNALING WITH REPUTABLE VC TIES

2011
Conference Papers

Abstract

In this study I look at how inter-organizational ties with reputable venture capital (VC) firms affect the valuations that entrepreneurial ventures receive from public investors at initial public offerings (IPOs). I propose that the effect of signaling is attenuated when there is misalignement of strategic interests between a venture and its VC investors. I consider the level of shares sold by insiders at the IPO and the enforcement of demand registration rights as elements indicating misalignement of interests. Drawing on a sample of 86 IPOs in the main U.S. stock exchanges completed by entrepreneurial ventures in the Clean Technology sector, I find that, on average, affiliation with reputable VCs elicits a positive response by public investors. However, public markets react less favorably to reputable ties when insiders sell large amount of their shares at the IPO or when VCs force the offer of their shares by the enforcement of demand registration rights.

Official source

https://infoscience.epfl.ch/entities/publication/e6e836e6-0b4a-4bc6-bdbc-5c32ccc5a918

About this result

This page is automatically generated and may contain information that is not correct, complete, up-to-date, or relevant to your search query. The same applies to every other page on this website. Please make sure to verify the information with EPFL's official sources.

Graph Chat

Chat with Graph Search

Ask any question about EPFL courses, lectures, exercises, research, news, etc. or try the example questions below.

DISCLAIMER: The Graph Chatbot is not programmed to provide explicit or categorical answers to your questions. Rather, it transforms your questions into API requests that are distributed across the various IT services officially administered by EPFL. Its purpose is solely to collect and recommend relevant references to content that you can explore to help you answer your questions.

2011
Conference Papers

Abstract

Official source

https://infoscience.epfl.ch/entities/publication/e6e836e6-0b4a-4bc6-bdbc-5c32ccc5a918

About this result

Related concepts (25)

Initial public offering

An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges. Through this process, colloquially known as floating, or going public, a privately held company is transformed into a public company.

Venture capital

Venture capital (commonly abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth (in terms of number of employees, annual revenue, scale of operations, etc). Venture capital firms or funds invest in these early-stage companies in exchange for equity, or an ownership stake.

Insider trading

Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider information are illegal. This is because it is seen as unfair to other investors who do not have access to the information, as the investor with insider information could potentially make larger profits than a typical investor could make.