Fair Pricing or Sponsor Advantage? Initial Pricing of PE and VC Backed IPOs and Post Exit Performance in Sweden

Abstract

Financial sponsor backing by Private Equity (PE) or Venture Capital (VC) funds is involved in over 40% of Swedish IPOs between 2015 and 2024, yet evidence of its impact on initial pricing and post listing performance from US and UK markets does not translate consistently to the Swedish context. Swedish IPOs generate significant first day returns of 9.8% and first week returns of 12.8%, confirming that underpricing is present in the Swedish market. Post listing performance over the following year is weak, with a positive but marginally significant mean and a negative median, suggesting that the typical Swedish IPO underperforms its benchmark once the initial mispricing is corrected. Financial sponsor backing does not explain differences in re turns at any horizon, a conclusion that holds across all regression specifications, nonparametric tests and after excluding the anomalous 2021 boom year. The only variable that consistently explains first day returns is firm size, where larger IPOs generate larger first day returns