Underpricing of IPOs : Evidence from the Euronext Paris market

In this review of IPOs on Euronext listings, we find evidence of underpricing over a time span of 21 years (2000-2020). We investigate several time horizons: first day of listing, one month and 180 days later and compare with underlying market trends. Although there is clear average underpricing, and we propose a few explanations to that, it appears that market trends have an impact on underpricing size and variations. Indeed, underpricing is significantly larger when markets trends are “bullish” than in “bearish” phases. Underpricing, a feature of IPOs, appears in its magnitude, to rely upon market trends. While one would expect a more incitative underpricing in bear markets, facts do not support this view. Investors willing to buy IPOs in bull markets are pushing prices well above the IPO price tag while refraining to buy, whatever conservative is the price, in declining markets.