Private Equity and Venture Capital: An Empirical Analysis of Financially-Sponsored IPOs in the U.S. Stock Market

This thesis examines the underpricing and the three-year post-listing performance of Private Equity (PE) and Venture Capital (VC) backed Initial Public Offerings (IPOs) listed on Nasdaq and NYSE Exchanges between January 2013 and December 2024. The 265 PE-backed IPOs identified in the sample are compared with 580 VC-backed and 271 non-sponsored (non-PE/non-VC backed) IPOs. The first-day returns empirical results indicate the presence of systematic underpricing across all sponsor types, in line with IPO literature. VC-backed IPOs exhibit the highest underpricing, while PE-backed IPOs display lower underpricing, but not significantly below that of nonsponsored IPOs. The long-run performance empirical results present a more complex picture. The descriptive evidence shows that PE-backed IPOs tend to achieve the least negative three-year BHARs, but the year-over-year BHAR trends reveal that this pattern does not hold uniformly over time. In pre-COVID period, VC-backed IPOs were in fact outperforming PE-backed IPOs. Additionally, the regression findings indicate that the sponsorship effects weaken once controlling for COVID-19, emerging as the dominant driver for long-run outcomes. Overall, the study highlights the differentiated role of financial sponsors in IPO pricing and post-listing performance, while underscoring the still largely unexplored thematic of COVID-19 shock on both undepricing and long-run returns