Investment attractiveness of IPO in Poland
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Abstract
According to the theory of market efficiency, the market price of shares always and fully corresponds to their intrinsic value, as it reflects all the information available about them. Under the assumption of the efficiency of financial markets during an IPO, issuers should receive market value for the shares issued, and investors should not receive an above-normal return on the shares allocated. However, two phenomena associated with IPOs are described in the literature: the phenomenon of underpricing (undervaluation) in the short term and underperformance (overvaluation) over a longer investment horizon. The purpose of the article is to assess the investment attractiveness of initial public offerings of shares on the Polish market, along with the demonstration of the main factors directly affecting their success or failure. The analysis covers the 6 largest, from the point of view of the size of the total offering (more than PLN 1 billion) and 12 smallest (less than PLN 106 million) IPOs that took place between 2017 and 2021 on the regulated market of the Warsaw Stock Exchange. The results of the study show that an investor who purchased shares of IPO companies in the offering and held them for the long term achieved significantly worse results than an investor who bought shares of average listed companies that did not conduct IPOs in the period under study on the same days.
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