Valuation Of Internet Stocks An Ipo Perspective

Valuation of internet stocks an ipo perspective

Valuation of Internet Stocks—An IPO Perspective

Valuation of Internet Stocks—An IPO Perspective Bartov, Eli; Mohanram, Partha; Seethamraju, Chandrakanth 2002-05-01 00:00:00 We empirically investigate valuations of Internet firms at various stages of the initial public offering (IPO) from two perspectives.

IPO Valuation Model

First, we examine the association between the valuation of Internet IPOs and a set of financial and nonfinancial variables, which prior anecdotal or empirical evidence suggests may serve as value drivers. Second, we document differences in IPO valuations between Internet and non‐Internet firms as well as across different stages in the IPO process—i.e., initial prospectus price, final offer price, and first trading day price—within each set of firms.

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Our primary two conclusions are as follows. First, there are noticeable differences between valuations of Internet and non‐Internet firms, especially at the prospectus and final IPO stage.

Valuation of internet stocks an ipo perspective

Specifically, the valuation of non‐Internet firms generally follows the conventional wisdom regarding valuation: positive earnings and cash flows are priced, while negative earnings and negative cash flows are not.

The valuation of Internet firms, however, departs from conventional wisdom, with earnings not being priced, and negative cash flows being priced perhaps because they are viewed as investments. This difference between the two classes of firms may be expected, given the age and unique nature of the Internet industry.

Cryptocurrency and blockchain jobs

Second, there are significant differences between the initial valuation of firms at the prospectus and IPO stage and their valuation by the stock market at the end of the first trading day. For non‐Internet firms, the difference is largely ascribed to the relative offering size. For Internet firms, however, the differences are with respect to positive cash flows, sales growth, R&D, and high‐risk warnings, in addition to the relative offering size.

Valuation of internet stocks an ipo perspective

http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.pngJournal of Accounting ResearchWileyhttp://www.deepdyve.com/lp/wiley/valuation-of-internet-stocks-an-ipo-perspective-cGMXFICrbr

 

/lp/wiley/valuation-of-internet-stocks-an-ipo-perspective-cGMXFICrbr

Publisher
Wiley
Copyright
University of Chicago on behalf of the Institute of Professional Accounting, 2002
ISSN
0021-8456
eISSN
1475-679X
DOI
10.1111/1475-679X.00050
Publisher site
See Article on Publisher Site

Abstract

We empirically investigate valuations of Internet firms at various stages of the initial public offering (IPO) from two perspectives.

First, we examine the association between the valuation of Internet IPOs and a set of financial and nonfinancial variables, which prior anecdotal or empirical evidence suggests may serve as value drivers. Second, we document differences in IPO valuations between Internet and non‐Internet firms as well as across different stages in the IPO process—i.e., initial prospectus price, final offer price, and first trading day price—within each set of firms.

Valuation of internet stocks an ipo perspective

Our primary two conclusions are as follows. First, there are noticeable differences between valuations of Internet and non‐Internet firms, especially at the prospectus and final IPO stage.

Information

Specifically, the valuation of non‐Internet firms generally follows the conventional wisdom regarding valuation: positive earnings and cash flows are priced, while negative earnings and negative cash flows are not. The valuation of Internet firms, however, departs from conventional wisdom, with earnings not being priced, and negative cash flows being priced perhaps because they are viewed as investments. This difference between the two classes of firms may be expected, given the age and unique nature of the Internet industry.

Second, there are significant differences between the initial valuation of firms at the prospectus and IPO stage and their valuation by the stock market at the end of the first trading day.

Valuation of internet stocks – an IPO perspective (2002)

For non‐Internet firms, the difference is largely ascribed to the relative offering size. For Internet firms, however, the differences are with respect to positive cash flows, sales growth, R&D, and high‐risk warnings, in addition to the relative offering size.

Journal

Journal of Accounting Research – Wiley

Published: May 1, 2002

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