IPO as a VC-Funds Type of Exit
Article Sidebar
Opublikowane:
lip 29, 2019
Słowa kluczowe:
Venture Capital, corporate finance and governance, financial markets, financial instruments, value of firms, capital and ownership structure
Main Article Content
Abstrakt
The key characteristic of private equity finance is that investors hold their investments only for a limited period of time. The key goal of VC funds is to grow the company to a point where it can be sold at a price that far exceeds the amount of capital invested. This process is called an exit or divestment. There are three basic types of exits: going public, being acquired by a larger corporation, a sale to a third-party investor.
It is a widely believed and accepted proposition in private equity literature that the initial public offering of a private equity portfolio company is the most successful and profitable exit opportunity. However, according to the few sources of literature, public offerings are not the preferred divestment type for venture capital firms. Going public is one of the most critical decisions in the lifecycle of a firm. This is not easy, as the process is very comprehensive and complex. Hence, a lot of considerations should be taken into account. Because every investee firm is different, a development plan to achieve a successful exit takes into consideration a number of macroeconomic and microeconomic factors. Moreover, several advantages and disadvantages of exit through an IPO could be indicated. The objective of this paper is to show the success and profitability of going public by VC funds. The VC’s exit type as a way of cashing out on its investment in a portfolio company is a consequence of the exit strategy, which means the plan for generating profits for owners and investors of a company. While an IPO is the most spectacular and visible form of exit, it is not the most common one, as historically in the US it was, but still in Europe it has not been yet. There will be both literature and statistical data coming from different studies and reports used in this research.
Downloads
Download data is not yet available.
Article Details
Jak cytować
Podedworna-Tarnowska, D. (2019). IPO as a VC-Funds Type of Exit. Journal of Management and Financial Sciences, (29), 99–129. https://doi.org/10.33119/JMFS.2017.29.5
Dział
Articles
Bibliografia
1. Abraham N.R., Joseph A., Underpricing ofVenture Capital IPOS: A Journey Through History, “International Journal of Management Research and Business Strategy”, October 2015, Vol. 4, No. 4, pp. 83-92.
2. Ang J.S., Brau J.C., Firm Transparency and the Costs of Going Public, “Journal of Financial Research”, Spring 2002, Vol, 25, No. 1, pp. 1-17.
3. Barry Ch., Muscarella C., Peavy H., Vetsuypens M., The role of venture capital in the creation of public companies: Evidence from the going-public process, “Journal of Financial Economics” 1990, Vol. 27, pp. 447-476.
4. Black B.S., Gilson R.J., Does Venture Capital Require an Active Stock Market? “Journal of Applied Corporate Finance”, Winter 1999, Vol. 11 No 4, pp. 34-48.
5. Bloomfield S., Venture Capital Funding: A Practical Guide to RaisingFinance, Kogan Page Ltd., London 2008.
6. Brav A., Gompers P., Myth or reality? The long-run underperformance of initialpublic offering: evidence from venture and non-venture-backed companies, “Journal of Finances” 1997, Vol. 4, No. 52, pp. 1791-1820.
7. Cowie H., Venture Capital in Europe, Federal Trust for Education and Research 1999, p. 32.
8. Cumming D.J., Macintosh J.G., A Cross-Country Comparison of Full and Partial Venture Capital Exit Strategies, “Journal of Banking and Finance” 2003, Vol. 27, pp. 511-548.
9. Demaria C., Introduction to Private Equity, Wiley, 2010, p. 51.
10. Emerging bestpracticesfor building the nextgeneration of venture-backed leadership, Spencer Stuart and NVCA Study, 2010.
11. European Private Equity Activity Data 2007-2015, https://www.investeurope.eu/ research/invest-europe-publications/#i/ (retrieved on 8.04.2017).
12. European Private Equity Activity Statistics on Fundraising, Investments & Divestments, 2015, https://www.investeurope.eu/media/476271/2015-european-private-equity- activity.pdf (retrieved on 8.04.2017).
13. Franzke S.A., Underpricing of Venture-Backed and Non-Venture-Backed IPOs: Ger- manys Neuer Market, CFS Working Paper, 2001, No. 2001/01.
14. Fuerst O., Geiger U., From Concept to Wall Street, Financial Times Prentice Hall, 2003, p. 247.
15. Global Trends in Venture Capital: State of the IPO Market, Deloitte, NVCA, June 22, 2011.
16. Gompers P.A., Grandstanding in the venture capital industry, “Journal of Financial Economics” 1996, No. 42, pp. 133-156.
17. Gompers P. A., Lerner J. A., The Venture Capital Cycle, The MIT Press, Cambridge 1999.
18. Gompers P.A., Lerner J.A., The Venture Capital revolution, “Journal of Economic Perspectives”, Spring, 2001, Vol. 15, No. 2, pp. 145-168.
19. Gompers P.A., Lerner J., What Drives Venture Fundraising?, Brookings Papers on Economic Activity-Microeconomics 1998, pp. 149-92.
20. Hall B.H., The Financing of Research and Development, “Oxford Review of Economic Policy” 2002, Vol. 18, No. 1, pp. 35-51.
21. Handbook of Research on Venture Capital, H. Landstrom (Ed.), Edward Elgar Pub- lishing Limited, Cheltenham 2007, p. 11.
22. http://www.psik.org.pl/glossary.html/ (retrieved on 5.04.2017).
23. https://www.investeurope.eu/about-private-equity/private-equity-explained/ (retrieved on 5.04.2017).
24. https://www.investeurope.eu/research/about-research/glossary/ (retrieved on 5.04.2017).
25. Hyytinen A., How Important Are Exits for Venture Capital Finance? Evidence from Finland, [in:] Venture Capital, Entrepreneurship, and Public Policy, V. Kanniainen and Ch. Keuschnigg (Eds.), MIT 2005, pp. 127-149.
26. Ibrahim D.M., The New Exit in Venture Capital, “Vanderbilt Law Review”, January 2012, Vol. 65, No. 1, pp. 1-47.
27. Jelic R., Wright M., Exits, performance, and late stage private equity: The case of UK management buy-outs, “European Financial Management”, June 2011, Vol. 17, No. 3, pp. 560-593.
28. Jenkinson T., Ljungqvist A., GoingPublic. The Theory and Evidence on How Companies Raise Equity Finance, Clarendon Press, Oxford 1996.
29. Klonowski D., Private equity in Poland, Winning Leadership in Emerging Markets, Polgrave MacMillan, 2011.
30. Lee P.M. and Wahal S., Grandstanding, Certification and the Underpricing of Ven- ture Capital Backed IPOs, “Journal of Financial Economics” 2004, Vol. 73, No. 2, pp. 375-407.
31. Lerner J., Venture Capitalists and the Decision to Go Public, “Journal of Financial Economics” 1994, Vol. 35, No. 3, pp. 293-316.
32. Loughran T., Ritter J.R., The New Issue Puzzle, “Journal of Finance” 1995, Vol. 50, No. 1, pp. 23-51.
33. Macintosh J.G., Venture capital exits in Canada and the United States, [in} Financing Growth in Canada, P.J. Halpern (Ed.), University of Calgary Press 1997, pp. 279-356.
34. Marisettya V.B., Subrahmanyam M.G., Group affiliation and the performance of IPOs in the Indian stock market, “Journal of Financial Markets” 2010, No. 13, pp. 196-223.
35. Megginson W., Weiss K. A., Venture Capitalist Certification in Initial Public Offerings, “Journal of Finance”, July 1991, Vol. 46, No. 3, pp. 879-903.
36. Mogilevsky V., Murgulov Z., Underpricing of private equity backed, venture capital backed and non-sponsored IPOs, “Investment Management and Financial Innova- tions” 2012, Vol. 9, No. 3, pp. 47-59.
37. NVCA Yearbook 2016, https://nvca.org/ (retrieved on 8.04.2017).
38. Paleari S., Vismara S., Over-optimism when pricingIPOs, “Managerial Finance” 2007, Vol. 33, No. 6, pp. 352-367.
39. Podedworna-Tarnowska D., Company Valuation within the IPO Process, [in:] Business Valuation. A Basic Approach, M. Panfil, A. Szablewski (Eds.), Poltext, Warszawa 2012, pp. 227-251.
40. Podedworna-Tarnowska D., Niedowartościowanie w procesie IPO, “Prace Naukowe Wyższej Szkoły Bankowej w Gdańsku” 2013, Vol. 27, pp. 129-141.
41. Povaly S., Private Equity Exits Divestment Process Management for Leveraged Buyouts, Springer 2007.
42. Ritter J.R., Initial Public Offerings: VC-backed IPO Statistics Through 2015, January 6, 2016, https://site.warrington.ufl.edu/ritter/files/2016/02/Initial-Public-Offerings- VC-backed-IPO-Statistics-Through-2015-2016-01-06.pdf (retrieved on 5.04.2017).
43. Ritter J.R., The Costs of Going Public, “Journal of Financial Economics”, December 1987, Vol. 19, No. 2. pp. 269-281.
44. Rynek private equity w Polsce 2016. Trendy i szanse rozwoju, KPMG, PSIK, http:// www.psik.org.pl/pliki/psik/Raporty/Raport%20KPMG_Rynek%20private%20equity %20 w%20Polsce%202016.pdf (retrieved on 8.04.2017).
45. Schwienbacher A., An Empirical Analysis of Venture Capital Exits in Europe and the United States, Working paper, University of Amsterdam, January 2005, pp. 1-38.
46. Smith D.G., The Exit Structure of Venture Capital, “UCLA Law Review” 2005, No. 315, Vol. 53, pp. 316-356, University of Wisconsin Legal Studies Research Paper No. 1005.
47. The Statistics Portal https://www.statista.com/statistics/280260/venture-capital-fund- raising-by-holding-companies-in-the-usa/ (retrieved on 8.04.2016).
48. Trabelsi D., Venture Capital and Timing of IPO, Universite Paris 1 - Pantheon - Sor- bonne, September 2007, p. 2.
49. Venture Impact, The Economic Importance of Venture Capital Backed Companies to the U.S. Economy, NVCA.
50. Venture Monitor, NVCA Pitch Book, 4Q 2016, http://nvca.org/wp-content/uploads/ 2017/01/4Q_2016_PitchBook_NVCA_Venture_Monitor.pdf/ (retrieved on 8.04.2017).
51. Vismara S., Paleari S., Ritter J.R., Europes Second Markets for Small Companies, “European Financial Management”, June 2012, Vol. 18, Issue 3, pp. 352-388.
52. Wright M., Robbie K., Venture Capital and Private Equity: A Review and Synthesis, “Journal of Business Finance & Accounting”, June/July 1998, Vol. 25, Issue 5-6, pp. 521-570.
2. Ang J.S., Brau J.C., Firm Transparency and the Costs of Going Public, “Journal of Financial Research”, Spring 2002, Vol, 25, No. 1, pp. 1-17.
3. Barry Ch., Muscarella C., Peavy H., Vetsuypens M., The role of venture capital in the creation of public companies: Evidence from the going-public process, “Journal of Financial Economics” 1990, Vol. 27, pp. 447-476.
4. Black B.S., Gilson R.J., Does Venture Capital Require an Active Stock Market? “Journal of Applied Corporate Finance”, Winter 1999, Vol. 11 No 4, pp. 34-48.
5. Bloomfield S., Venture Capital Funding: A Practical Guide to RaisingFinance, Kogan Page Ltd., London 2008.
6. Brav A., Gompers P., Myth or reality? The long-run underperformance of initialpublic offering: evidence from venture and non-venture-backed companies, “Journal of Finances” 1997, Vol. 4, No. 52, pp. 1791-1820.
7. Cowie H., Venture Capital in Europe, Federal Trust for Education and Research 1999, p. 32.
8. Cumming D.J., Macintosh J.G., A Cross-Country Comparison of Full and Partial Venture Capital Exit Strategies, “Journal of Banking and Finance” 2003, Vol. 27, pp. 511-548.
9. Demaria C., Introduction to Private Equity, Wiley, 2010, p. 51.
10. Emerging bestpracticesfor building the nextgeneration of venture-backed leadership, Spencer Stuart and NVCA Study, 2010.
11. European Private Equity Activity Data 2007-2015, https://www.investeurope.eu/ research/invest-europe-publications/#i/ (retrieved on 8.04.2017).
12. European Private Equity Activity Statistics on Fundraising, Investments & Divestments, 2015, https://www.investeurope.eu/media/476271/2015-european-private-equity- activity.pdf (retrieved on 8.04.2017).
13. Franzke S.A., Underpricing of Venture-Backed and Non-Venture-Backed IPOs: Ger- manys Neuer Market, CFS Working Paper, 2001, No. 2001/01.
14. Fuerst O., Geiger U., From Concept to Wall Street, Financial Times Prentice Hall, 2003, p. 247.
15. Global Trends in Venture Capital: State of the IPO Market, Deloitte, NVCA, June 22, 2011.
16. Gompers P.A., Grandstanding in the venture capital industry, “Journal of Financial Economics” 1996, No. 42, pp. 133-156.
17. Gompers P. A., Lerner J. A., The Venture Capital Cycle, The MIT Press, Cambridge 1999.
18. Gompers P.A., Lerner J.A., The Venture Capital revolution, “Journal of Economic Perspectives”, Spring, 2001, Vol. 15, No. 2, pp. 145-168.
19. Gompers P.A., Lerner J., What Drives Venture Fundraising?, Brookings Papers on Economic Activity-Microeconomics 1998, pp. 149-92.
20. Hall B.H., The Financing of Research and Development, “Oxford Review of Economic Policy” 2002, Vol. 18, No. 1, pp. 35-51.
21. Handbook of Research on Venture Capital, H. Landstrom (Ed.), Edward Elgar Pub- lishing Limited, Cheltenham 2007, p. 11.
22. http://www.psik.org.pl/glossary.html/ (retrieved on 5.04.2017).
23. https://www.investeurope.eu/about-private-equity/private-equity-explained/ (retrieved on 5.04.2017).
24. https://www.investeurope.eu/research/about-research/glossary/ (retrieved on 5.04.2017).
25. Hyytinen A., How Important Are Exits for Venture Capital Finance? Evidence from Finland, [in:] Venture Capital, Entrepreneurship, and Public Policy, V. Kanniainen and Ch. Keuschnigg (Eds.), MIT 2005, pp. 127-149.
26. Ibrahim D.M., The New Exit in Venture Capital, “Vanderbilt Law Review”, January 2012, Vol. 65, No. 1, pp. 1-47.
27. Jelic R., Wright M., Exits, performance, and late stage private equity: The case of UK management buy-outs, “European Financial Management”, June 2011, Vol. 17, No. 3, pp. 560-593.
28. Jenkinson T., Ljungqvist A., GoingPublic. The Theory and Evidence on How Companies Raise Equity Finance, Clarendon Press, Oxford 1996.
29. Klonowski D., Private equity in Poland, Winning Leadership in Emerging Markets, Polgrave MacMillan, 2011.
30. Lee P.M. and Wahal S., Grandstanding, Certification and the Underpricing of Ven- ture Capital Backed IPOs, “Journal of Financial Economics” 2004, Vol. 73, No. 2, pp. 375-407.
31. Lerner J., Venture Capitalists and the Decision to Go Public, “Journal of Financial Economics” 1994, Vol. 35, No. 3, pp. 293-316.
32. Loughran T., Ritter J.R., The New Issue Puzzle, “Journal of Finance” 1995, Vol. 50, No. 1, pp. 23-51.
33. Macintosh J.G., Venture capital exits in Canada and the United States, [in} Financing Growth in Canada, P.J. Halpern (Ed.), University of Calgary Press 1997, pp. 279-356.
34. Marisettya V.B., Subrahmanyam M.G., Group affiliation and the performance of IPOs in the Indian stock market, “Journal of Financial Markets” 2010, No. 13, pp. 196-223.
35. Megginson W., Weiss K. A., Venture Capitalist Certification in Initial Public Offerings, “Journal of Finance”, July 1991, Vol. 46, No. 3, pp. 879-903.
36. Mogilevsky V., Murgulov Z., Underpricing of private equity backed, venture capital backed and non-sponsored IPOs, “Investment Management and Financial Innova- tions” 2012, Vol. 9, No. 3, pp. 47-59.
37. NVCA Yearbook 2016, https://nvca.org/ (retrieved on 8.04.2017).
38. Paleari S., Vismara S., Over-optimism when pricingIPOs, “Managerial Finance” 2007, Vol. 33, No. 6, pp. 352-367.
39. Podedworna-Tarnowska D., Company Valuation within the IPO Process, [in:] Business Valuation. A Basic Approach, M. Panfil, A. Szablewski (Eds.), Poltext, Warszawa 2012, pp. 227-251.
40. Podedworna-Tarnowska D., Niedowartościowanie w procesie IPO, “Prace Naukowe Wyższej Szkoły Bankowej w Gdańsku” 2013, Vol. 27, pp. 129-141.
41. Povaly S., Private Equity Exits Divestment Process Management for Leveraged Buyouts, Springer 2007.
42. Ritter J.R., Initial Public Offerings: VC-backed IPO Statistics Through 2015, January 6, 2016, https://site.warrington.ufl.edu/ritter/files/2016/02/Initial-Public-Offerings- VC-backed-IPO-Statistics-Through-2015-2016-01-06.pdf (retrieved on 5.04.2017).
43. Ritter J.R., The Costs of Going Public, “Journal of Financial Economics”, December 1987, Vol. 19, No. 2. pp. 269-281.
44. Rynek private equity w Polsce 2016. Trendy i szanse rozwoju, KPMG, PSIK, http:// www.psik.org.pl/pliki/psik/Raporty/Raport%20KPMG_Rynek%20private%20equity %20 w%20Polsce%202016.pdf (retrieved on 8.04.2017).
45. Schwienbacher A., An Empirical Analysis of Venture Capital Exits in Europe and the United States, Working paper, University of Amsterdam, January 2005, pp. 1-38.
46. Smith D.G., The Exit Structure of Venture Capital, “UCLA Law Review” 2005, No. 315, Vol. 53, pp. 316-356, University of Wisconsin Legal Studies Research Paper No. 1005.
47. The Statistics Portal https://www.statista.com/statistics/280260/venture-capital-fund- raising-by-holding-companies-in-the-usa/ (retrieved on 8.04.2016).
48. Trabelsi D., Venture Capital and Timing of IPO, Universite Paris 1 - Pantheon - Sor- bonne, September 2007, p. 2.
49. Venture Impact, The Economic Importance of Venture Capital Backed Companies to the U.S. Economy, NVCA.
50. Venture Monitor, NVCA Pitch Book, 4Q 2016, http://nvca.org/wp-content/uploads/ 2017/01/4Q_2016_PitchBook_NVCA_Venture_Monitor.pdf/ (retrieved on 8.04.2017).
51. Vismara S., Paleari S., Ritter J.R., Europes Second Markets for Small Companies, “European Financial Management”, June 2012, Vol. 18, Issue 3, pp. 352-388.
52. Wright M., Robbie K., Venture Capital and Private Equity: A Review and Synthesis, “Journal of Business Finance & Accounting”, June/July 1998, Vol. 25, Issue 5-6, pp. 521-570.