The Implications of Private Funding Frequency on Investment Performance– The Relation Between Deal Number at IPO and the Likelihood of a Down Round IPO

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School of Business | Bachelor's thesis
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Date

2019

Department

Rahoituksen laitos

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Mcode

Degree programme

Rahoitus

Language

en

Pages

20+5

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Abstract

Using a sample of 282 venture-backed initial public offerings in the U.S. between 2010 and 2018, I study the relation between the IPO Deal Number, i.e. the investment rounds received at IPO, and the likelihood of a down round IPO. Consistent with e.g. Forbes et al. (2010) and Brougham and Fried (2012), I find that for various reasons, investors avoid down rounds, which seems to cause valuation inflation as the deal number increases, increasing the likelihood of a down round IPO. This study also adds on to previous research on venture performance and return determinants by being the first study focusing on the relation between deal frequency and down round IPOs.

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Thesis advisor

Kokkonen, Joni

Keywords

Venture Capital, IPO, Down Round, Deal Number, Deal Frequency

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https://urn.fi/URN:NBN:fi:aalto-201912296775

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[kand] Kauppakorkeakoulu / BIZ