Abstract:Some owners of private firms who cash out their investments sell their firms all at once. Others sell part of the firm in an initial public offering (IPO), then sell the remainder shortly after the IPO. Using a unique data set from IPO filings we find that the expected payoff to going public before selling the firm is 200 percent higher than selling privately. One explanation for these different valuations is that public markets are more competitive than private markets for corporate assets. An alternative exp… Show more
“…Ragozzino and Reuer (2007) offer strong evidence that certain IPO characteristics signal the value of entrepreneurial firms and thereby attract M&A suitors. Consistent with the signaling theory that the IPO process acts as a screening device of a firm's quality, Mantecon and Thistle (2011) find that the expected payoff from going public before selling the firm is 200% higher than that from selling privately. Therefore, how withdrawing from an IPO registration affects the valuation of the firm as a private takeover target is an empirical question.…”
“…Ragozzino and Reuer (2007) offer strong evidence that certain IPO characteristics signal the value of entrepreneurial firms and thereby attract M&A suitors. Consistent with the signaling theory that the IPO process acts as a screening device of a firm's quality, Mantecon and Thistle (2011) find that the expected payoff from going public before selling the firm is 200% higher than that from selling privately. Therefore, how withdrawing from an IPO registration affects the valuation of the firm as a private takeover target is an empirical question.…”
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