How do Investments Banks Value Initial Public Offerings (IPOs)?

W (Wouter) De Maeseneire

Research output: Contribution to journalArticleAcademicpeer-review

30 Citations (Scopus)


We investigate the valuation and the pricing of initial public offerings (IPOs) by investment banks for a unique dataset of 49 IPOs on Euronext Brussels in the 1993¿2001 period. We find that for each IPO several valuation methods are used, of which Discounted Free Cash Flow (DFCF) is the most popular. The offer price is mainly based on DFCF valuation, to which a discount is applied. Our results suggest that DDM tends to underestimate value, while DFCF produces unbiased value estimates. When using multiples, investment banks rely mostly on future earnings and cash flows. Multiples based on post-IPO forecasted earnings and cash flows result in more accurate valuations.
Original languageUndefined/Unknown
Pages (from-to)130-160
Number of pages31
JournalJournal of Business Finance and Accounting
Issue number1&2
Publication statusPublished - 2009

Research programs

  • EUR ESE 33

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