The Survival Profile of U.S. IPO Issuers

Abstract

This article examines the survival profile of U.S. Initial Public Offerings (IPOs) for the 1985-2005 period. More specifically, the authors develop Multinomial Logit models based on the information contained in the prospectus and attempt to determine what factors influence the post-issue transition of the IPO firms into survivors, non-survivors or targets. The main findings of the article are that larger IPOs experience a lower probability of delisting, and higher underpricing increases the probability of failure or becoming a target. Further, the presence of venture capitalists and a prestigious underwriter at the IPO stage seems to influence the post-IPO transition state. They also estimate an accelerated-failure-time model as a robustness test and confirm their previous results. They also find that the survival time is negatively affected if the IPO is in the internet sector. TOPICS:Security analysis and valuation, statistical methods, performance measurement

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