The Impact of the COVID-19 Pandemic on European IPO Markets

Abstract

The COVID-19 pandemic has had profound impacts on global financial markets, but the recency of this event means that there are many gaps in the current literature that still need to be filled. Notably, there has been a particular lack of research on IPO markets, likely due to the general belief that IPO markets were not as negatively impacted as other markets during the COVID-19 pandemic. This paper thus contributes to this area of financial literature by researching the performance of European IPO markets during the COVID-19 pandemic. The findings of this paper are that European IPOs issued during the pandemic did not necessarily perform better than IPOs issued outside of the pandemic. First, short-run measures of IPO performance find that European IPOs issued during the pandemic faced increased underpricing and initial return volatility. Second, this paper also finds positive correlations between pandemic severity and underpricing and initial return volatility, indicating that the more severe periods of the pandemic had greater effect on short-run IPO performance than less severe periods. Third, this paper finds that, in the long run, European IPO issued during the pandemic face significant negative long-run abnormal returns.