The Swedish stock market has in recent years seen an upswing in IPO activity, with 2021 being the most IPO-dense year in decades. Firms going public aim to raise capital by selling shares, but the success of this process depends on accurately setting the share value in line with investors’ expectations. Misvaluing the shares can lead to underperformance in fundraising goals, either through overvaluing the share, resulting in overpricing, or undervaluing it, leading to underpricing. There are numerous factors that influence the value of the share, but also the expectations of the investors. This paper had the aim of explaining the relationship between firms’ earned media publicity prior to the listing day and IPO underpricing, analyzing this connection through the perspective of theories within information asymmetry and agenda setting theory. These insights are advantageous for more accurately identifying the key factors that influence IPO pricing.
This is a quantitative study that has adopted a positivistic approach with a deductive research design. All data gathered for the purpose of this study comes from Refinitiv Eikon and the Retriever Media archive. The sample includes 183 Swedish firms listed across four stock exchanges between 2014 and 2023. The paper is divided into two parts: one examining the overall relationship between media coverage and underpricing across all exchanges, and the other focusing on individual stock markets. Furthermore, to see whether there is any difference in media’s timing, two media timeframes were constructed. One representing the media coverage about the firm one month prior to the listing day up to the IPO, and the other three months prior to the listing day. This gave the study a better chance explaining at which time media coverage has the most impact on underpricing, resulting in a more comprehensive analysis.
The findings of this study suggest that media publicity occurring closer to the IPO has a greater effect on underpricing compared to publicity dating further back in time to the listing day. A significant relationship was found between earned media coverage in the month leading up to the IPO and underpricing across the entire sample, indicating that media publicity occurring one month prior to the listing up to the IPO has a significant role in the IPO process. This study failed to find any other relationship in any of the other models. Suggesting that further research in media’s role in the IPO process is needed.