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Pricing Shares in Equity Crowdfunding

Research Papers in Economics, No. 7/15

29 Pages Posted: 30 Jun 2015 Last revised: 28 Jul 2016

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Matthias Neuenkirch

University of Trier - Faculty of Economics

Date Written: July 27, 2016

Abstract

We analyze the pricing of cash flow rights in start-up companies using a unique data set of 44 equity crowdfunding campaigns. Our sample consists of 499 backers who invested during the period from November 6, 2011, to March 25, 2014, on the German equity crowdfunding portal Innovestment. In contrast with all other European equity crowdfunding portals, Innovestment runs a multi-unit second-price auction in which backers themselves can specify the price of an investment ticket. We exploit this unique auction mechanism to analyze backers’ willingness to pay for cash flow rights. We find that campaign characteristics, investor sophistication, progress in funding, herding, and stock market volatility influence backers’ willingness to pay in an economically meaningful manner while geographic distance, learning effects, and sniping at the end of an auction have no effect.

Keywords: Auctions, Equity crowdfunding, Valuation of shares

JEL Classification: D44, G11, M13

Suggested Citation

Hornuf, Lars and Neuenkirch, Matthias, Pricing Shares in Equity Crowdfunding (July 27, 2016). Research Papers in Economics, No. 7/15. Available at SSRN: https://ssrn.com/abstract=2624908 or http://dx.doi.org/10.2139/ssrn.2624908

Lars Hornuf

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition

Marstallplatz 1
Munich, 80539
Germany

Matthias Neuenkirch (Contact Author)

University of Trier - Faculty of Economics ( email )

Universitätsring 15
Trier, 54296
Germany
+49 - (0)651 - 201 - 2629 (Phone)

HOME PAGE: http://www.uni-trier.de/index.php?id=50130

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