The private equity industry - Post-IPO performance of companies floated by private equity firms on the Stockholm Stock Exchange in 2002

Abstract

This study’s purpose is to investigate what happens economically with companies that are floated on the Stockholm Stock Exchange by private equity firms and if their remaining ownership share can be linked to the floated company’s development. We found this interesting to investigate from an investor’s point of view to find out how these kinds of IPOs perform on the stock market. We also found it interesting so see how changes in the company co-vary with the private equity firms remaining voting power. Because of time and cost limitation we couldn’t conclude our first idea and we had to narrow the study down to four companies. The data we collected was share prices gathered form the Stockholm Stock Exchange and for the company specifics we gathered the information from financial annual reports. We use the DuPont model to evaluate the companies and a CAR test to compare the long run share price performance to a sector index. We didn’t find any evidence that the private equity firms remaining voting power had any influence on how the company developed neither economically nor on the stock market. On the other hand neither of the companies performed worse after the private equity firms had sold out there shares. The conclusions drawn in this study are that companies floated by private equity companies do perform better than comparable stock index in the long run. We also conclude that the private equity firms remaining voting power has no effect after the floating on the floated company’s economic status.