Underpricing, wealth losses and the role of venture capitalists in IPOs: theory and evidence

The theme of Initial Public Offering underpricing has been thoroughly analyzed and discussed in the economic literature. In the last decades, authors have developed numerous theories explaining the trend. This thesis will first describe the Entrepreneurial Wealth Losses (EWL) theory developed by Habib and Ljungqvist (2001), which focuses on the trade-offs between underpricing and the promotion cost of going public, and the certification role of venture capitalists in public offerings. It will also provide additional empirical evidence from the IPO of Rivian, an American electric-car maker which experienced significant underpricing on its first day of trading.