Growth Capital-Backed IPOs
42 Pages Posted: 23 May 2014 Last revised: 14 May 2015
Date Written: May 13, 2015
Abstract
Growth capital investing is the financing of growing businesses that are investing in tangible assets and the acquisition of other companies. Growth capital is common in retailing, restaurant chains, and health care management, and represents 12% of all venture capital (VC)-backed initial public offerings (IPOs). Since 1980, investing in growth capital-backed IPOs has produced mean 3-year style-adjusted buy-and-hold returns of 23.7%, in contrast to style-adjusted returns of approximately zero for other VC-backed and buyout-backed IPOs. One-third of growth capital-backed IPOs are rollups, and these have produced much higher returns for investors than rollups without a financial sponsor.
Keywords: Buyouts, growth capital, initial public offerings, long-run performance, reverse LBOs, rollups, venture capital
JEL Classification: G14, G24, G32
Suggested Citation: Suggested Citation
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