Abstract
We attempt to answer the following three questions about the new capital raised in IPOs: Why do some IPO companies raise a lot of new capital while some others don’t? Where do the IPO companies use the new capital they raise in IPO? How does the use of new capital affect the operating performance of IPO companies? We find that companies with higher R&D spending, higher capital expenditure, lower working capital and more long term debt tend to raise more capital in IPOs. These firms also spend more on R&D and capital expenditure. The more new capital firms raise in IPOs, the lower sales growth rate they have. However, firms spending a higher proportion of new capital on R&D seem to have higher sales growth rate.
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