Pricing Initial Public Offerings on 'New' European Stock Markets

In 2000 more companies listed in Europe than in the US. This is mainly due to the success of "new" stock markets designed for high-growth companies. In this paper we analyse a sample of 482 Initial Public Offerings (IPOs), listed on five "new" European stock markets up to March 2001. We investigate the determinants of their first-day returns. We find a mean first-day return (underpricing) equal to +38.09%. Market returns, the IPO firm's risk and price revisions in the premarket are positively related to first-day returns, whereas IPO deal flow shows is inversely related to underpricing. We also show that the Internet euphoria impacts first-day returns.