Despite the storied stock successes of technology icons such as Amazon and Google, most initial public offerings (IPOs) have burned investors. New Bain & Company analysis shows that over five years, two-thirds of global IPOs underperformed their established, publicly listed peers, with a median 46 percentage points lower total shareholder return (TSR). The elite companies that manage to outperform their public peers in TSR do three things differently. They view the IPO as a beginning and a means to a longer-term value creation, rather than any kind of end in itself. They understand how post-IPO investors have fundamentally different objectives and incentives. And they emphasize strategic support to help build that long-term value, rather than simply seeking transactional help. Executives who have prepared for life beyond the IPO position their companies to earn investors’ trust.
Hubert Shen is a partner with Bain & Company’s Mergers & Acquisitions and Private Equity practices. Henrik Poppe leads the Corporate Finance practice in Europe, the Middle East and Africa. Mike Kuehnel is a partner with Bain’s Financial Services and Corporate Strategy practices. They are based, respectively, in Los Angeles, Oslo and Frankfurt.
Reversing the Winner’s Curse of the IPO
Congratulations, you’ve sold shares to the public. Now what?