The Long-Term Performance of Overpriced and Underpriced Initial Public Offerings

This study investigates the long-term performance of overpriced and underpriced IPOs using a comprehensive dataset of U.S. IPOs from 2000 to 2019. Our findings reveal that overpriced IPOs, accounting for 21.36% of our sample, significantly underperform against both market benchmarks and underpriced IPOs. Interestingly, these overpriced IPOs demonstrate lower alphas in multi-factor regression analyses, suggesting nuanced market dynamics. Furthermore, overpriced IPOs are more likely to delist faster than underpriced ones, indicating a higher risk profile. This research enriches the IPO literature by comparing the performance of overpriced and underpriced IPOs and their implications on long-term returns.