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Valuing Internet Stocks At The Initial Public Offering

In: The Rise and Fall of Europe's New Stock Markets

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  • Michiel Botman
  • Peter Roosenboom
  • Tjalling van der Goot

Abstract

This chapter investigates the relevance of accounting and other information to valuing Internet IPOs during the years 1998–2000 in Europe and the United States. We show that market value is negatively related to net income in the Internet bubble period before April 1, 2000 in both European and U.S. IPO markets. This is consistent with an Internet firm’s start-up expenditures being considered as assets, not as costs. Furthermore, for the U.S. IPO market, we find that free float is value relevant during the Internet bubble. Underwriters and issuers restricted the supply of shares at the IPO. This drove up market prices as investors were keen to buy Internet IPO shares.

Suggested Citation

  • Michiel Botman & Peter Roosenboom & Tjalling van der Goot, 2004. "Valuing Internet Stocks At The Initial Public Offering," Advances in Financial Economics, in: The Rise and Fall of Europe's New Stock Markets, pages 131-155, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:afeczz:s1569-3732(04)10006-6
    DOI: 10.1016/S1569-3732(04)10006-6
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