Analysis of Underestimation of Private Equity-Backed Companies on the Warsaw Stock Exchange in the Period 2007–2014

Abstract

The global economy is distinguished by the dynamic development of financial markets and with it creating a new specific segments of the market. One of them is the market for venture capital and private equity funds, which has been developing very dynamically for more than 50 years. This article aims to analyze the level of underestimation of the IPO on the Warsaw Stock Exchange companies supplied by venture capital and private equity funds. Analyzing the rate of return of 16 companies backed by VC funds and 238 companies which do not have the support of venture capital funds in the 2007–2014 period, it should be stated that the  traditional companies reached the lower level of underestimation. For the companies of a broad market, the underestimation level of the IPO was 7.3% and for companies with VC/PE support – 8.24%.