An Empirical Study on Internet IPO Performance

Abstract

This study analyzes the performance of large 86 IPO Internet firms during the period 1993-2013. The study documented an average initial one-day return of 29.82% for internet IPOs. The one-year average buy and hold return for IPO stocks was 30.86 %. The excess five year buy and hold return for IPO internet stocks averaged approximately 60.72% compared with the market index. On a comparative basis, the returns for the IPO internet stocks have increased in magnitude substantially during the five-year period after listing. The average initial one-day return was higher for Nasdaq listed Internet firms compared to NYSE listed stocks. But the five year buy and hold return for internet stocks listed in the NYSE was approximately three times that of Nasdaq listed stocks. The regression results documents evidence to show that size is positive related to IPO returns. The study suggests that the long term returns (five year buy and hold excess return) is lower for firms listed during the recession and dot com bubble period.