Timing or Biding Time? Evidence on Firm Selection from the COVID-19 IPO Wave

I examine how a private firm’s decision to conduct an IPO changes during an IPO wave, comparing firms listing early during the wave (early movers) to those listing during the regular hot market period (hot issuers). Using an extensive sample of European private firms around the COVID-19 pandemic, I conduct analyses on ex-ante selection, finding that firms listing during the IPO wave had lower ex-ante profitability. This effect is augmented for early movers. To examine ex-post selection, I identify the closest matching private firm for each IPO firm and use a differences-in-differences analysis. I find that early movers are not underperforming their matched private control group while showing higher sales growth, indicating rational IPO motives via higher expected cashflows. Hot issuers, on the other hand, do not show increased sales growth. Analyses of market share growth suggest that early movers may be benefitting from a first-mover advantage beyond selection.