The price of rapid exit in venture capital-backed IPOs

This paper proposes an explanation for two empirical puzzles surrounding initial public offerings (IPOs). Firstly, it is well documented that IPO underpricing increases during “hot issue” periods. Secondly, venture capital (VC) backed IPOs are less underpriced than non-venture capital backed IPOs during normal periods of activity, but the reverse is true during hot issue periods: VC backed IPOs are more underpriced than non-VC backed ones. This paper shows that when IPOs are driven by the initial investor’s desire to exit from an existing investment in order to finance a new venture, both the value of the new venture and the value of the existing firm to be sold in the IPO drive the investor’s choice of price and fraction of shares sold in the IPO. When this is the case, the availability of attractive new ventures increases equilibrium underpricing, which is what we observe during hot issue periods. Moreover, I show that underpricing is affected by the severity of the moral hazard problem between an investor and the firm’s manager. In the presence of a moral hazard problem the degree of equilibrium underpricing is more sensitive to changes in the value of the new venture. This can explain why venture capitalists, who often finance firms with more severe moral hazard problems, underprice IPOs less in normal periods, but underprice more strongly during hot issue periods. Further empirical implications relating the fraction of shares sold and the degree of underpricing are presented

New test of modulated electron capture decay of hydrogen-like 142Pm ions: Precision measurement of purely exponential decay

An experiment addressing electron capture (EC) decay of hydrogen-like 142Pm60+ions has been conducted at the experimental storage ring (ESR) at GSI. The decay appears to be purely exponential and no modulations were observed. Decay times for about 9000 individual EC decays have been measured by applying the single-ion decay spectroscopy method. Both visually and automatically analysed data can be described by a single exponential decay with decay constants of 0.0126(7)s−1for automatic analysis and 0.0141(7)s−1for manual analysis. If a modulation superimposed on the exponential decay curve is assumed, the best fit gives a modulation amplitude of merely 0.019(15), which is compatible with zero and by 4.9 standard deviations smaller than in the original observation which had an amplitude of 0.23(4)

How do investment patterns of independent and captive private equity funds differ? Evidence from Germany

Private equity, Value adding, IPO, D82, G24, G32,