IPO Stock Performance amidst the COVID-19 Pandemic: Has It been Undervalued?

Randy Kuswanto

doi:10.24815/jdab.v8i1.19830

Abstract

The purpose of this study is to examine the underpricing phenomenon from IPO firms listed in Indonesia Stock Exchange during the COVID-19 pandemic. Using purposive sampling method, 34 IPO firms after the announcement of pandemic COVID-19 were selected as research samples. The IPO stock closing prices and returns on days 1, 5, 10, 15, and 20 were analyzed using paired sample t-test. The findings show underpricing phenomenon still occurred during the pandemic period. However, the underpricing only documented statistically significant on the T1 of the trading day. After the first day of trading, the stock’s returns consistently declined and were proved statistically insignificant at T5, T10, T15, and T20.

Highlights

At the time of an initial public offering, the IPO stock price on the secondary market had a tendency to exceed the initial offering price
The purpose of this study is to examine the underpricing phenomenon from IPO firms listed in Indonesia Stock Exchange during the COVID-19 pandemic
Based on table 1, the underpricing phenomenon still occurs with an average initial return of 24,69% on the first day of the trading day

Summary

Introduction

At the time of an initial public offering (hereinafter referred to as IPO), the IPO stock price on the secondary market had a tendency to exceed the initial offering price This phenomenon is commonly and empirically known as underpricing. The existence of underpricing phenomenon had been widely found by researchers across the globe (Arora & Singh, 2020; Chen et al, 2010; Jogiyanto, 2017; Mulchandani & Gerelani, 2018; Yan et al., 2019) This phenomenon shows IPO stock price is undervalued (in other words, cheap), and many investors were eyeing it (Juliana & Sumani, 2019). The term IPO and underpricing are historically inseparable because it almost exists in many capital markets across the world (Brycz et al, 2018; Güntürkün, 2012)

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Conclusion