Optimal timing of venture capital-backed IPO
Donia Trabelsi
(1, 2, 3)
,
Imen Mejri
(4)
Donia Trabelsi
- Fonction : Auteur
- PersonId : 181207
- IdHAL : donia-trabelsi
- ORCID : 0000-0002-4304-8907
- IdRef : 109192222
Résumé
This paper investigates the optimal exit time for a venture capitalist (VC) through an initial public offering (IPO). We use a real options approach and develop a model based on the uncertainty of the VC-backed firm’s cash flows. We assume that the VC sells his stake in two stages, i.e., at the IPO date (taking underpricing into account) and at the expiration of the lock-up period. We find a closed-form solution of the threshold at which it is optimal for the VC to exit and determine the expected first hitting time. Our main results show that more risk averse VC brings firms public earlier even if firm’s cash flows are negative; the IPO is more rapid if the VC required rate of return and firm cash flows’ volatility are high. However, underpricing does not play an important role in the VC decision regarding exit timing.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Communication dans un congrès |
Résumé |
en
This paper investigates the optimal exit time for a venture capitalist (VC) through an initial public offering (IPO). We use a real options approach and develop a model based on the uncertainty of the VC-backed firm’s cash flows. We assume that the VC sells his stake in two stages, i.e., at the IPO date (taking underpricing into account) and at the expiration of the lock-up period. We find a closed-form solution of the threshold at which it is optimal for the VC to exit and determine the expected first hitting time. Our main results show that more risk averse VC brings firms public earlier even if firm’s cash flows are negative; the IPO is more rapid if the VC required rate of return and firm cash flows’ volatility are high. However, underpricing does not play an important role in the VC decision regarding exit timing.
|
Titre |
en
Optimal timing of venture capital-backed IPO
|
Auteur(s) |
Donia Trabelsi
1, 2, 3
, Imen Mejri
4
1
IMT-BS - DEFI -
Département Droit, Economie et Finances
( 95568 )
- 9, rue Charles Fourier - 91011 Evry Cedex
- France
2
KIND -
Dynamique des réseaux, de l'innovation et de la connaissance
( 542857 )
- 9, rue Charles Fourier - 91011 Evry cedex
- France
3
LITEM -
Laboratoire en Innovation, Technologies, Economie et Management (EA 7363)
( 1042294 )
- 9 rue Charles Fourier, 91011 Evry Cedex
- France
4
NEOMA -
Neoma Business School
( 232915 )
- NEOMA Business School - Siège Social
1 Rue du Maréchal Juin
BP 215
76825 Mont Saint Aignan Cedex
- France
|
Langue du document |
Anglais
|
Vulgarisation |
Non
|
Comité de lecture |
Oui
|
Invité |
Non
|
Audience |
Internationale
|
Actes |
Non
|
Date de publication |
2020-09-04
|
Titre du congrès |
World Finance Conference
|
Date début congrès |
2020-09-04
|
Date fin congrès |
2020-09-06
|
Ville |
Malte (virtual conference)
|
Pays |
Malte
|
URL du congrès ou éditeur |
https://www.world-finance-conference.com/conference.php?id=19
|
Domaine(s) |
|
Mots-clés (JEL) |
|
Voir aussi |
|
Collaboration/Projet |
|
Mots-clés |
en
Venture capital, Optimal Exit Timing, IPO, Underpricing, Lock-up period
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