Electronic Markets

, Volume 22, Issue 4, pp 255–266

The IPO window of opportunity for digital product and service firms

  • Richard B. Carter
  • Troy J. Strader
  • Frederick H. Dark
Special Theme

DOI: 10.1007/s12525-012-0109-z

Cite this article as:
Carter, R.B., Strader, T.J. & Dark, F.H. Electron Markets (2012) 22: 255. doi:10.1007/s12525-012-0109-z
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Abstract

Recognizing the window of opportunity to go public for digital product and service (DPS) firms is especially critical because they have high fixed-to-variable cost (FCVC) ratios and winner-take-all industry competition. Too early and their very risky nature means a steep discount to their stock. Too late and they may not be able to sell stock or it may be too late to take advantage of a new product or service. We find that the size of the run-up in stock price at the IPO is higher (lower) for DPS firms the earlier (later) they go public and significantly more than for traditional firms. We also find that the DPS firms that go public earlier or later outside the window of opportunity are more likely to fail. This result is also stronger for DPS firms than for traditional firms.

Keywords

Digital productDigital serviceDigital technologyFinancing strategyInitial public offeringIPO timing

JEL classification

G24 – Investment Banking

Copyright information

© Institute of Information Management, University of St. Gallen 2012

Authors and Affiliations

  • Richard B. Carter
    • 1
  • Troy J. Strader
    • 2
  • Frederick H. Dark
    • 1
  1. 1.Iowa State UniversityAmesUSA
  2. 2.Drake UniversityDes MoinesUSA