Oil price uncertainty and IPOs

36 Pages Posted: 7 Sep 2021

See all articles by Magnus Blomkvist

Magnus Blomkvist

Audencia Business School; Audencia Business School

Nebojsa Dimic

University of Vaasa

Milos Vulanovic

EDHEC Business School

Date Written: August 31, 2021

Abstract

We examine the impact of oil price uncertainty on IPO volume in the oil and gas sector. By using the implied volatility of oil options, a forward looking exogenously determined uncertainty measure, we can clearly identify the effect of uncertainty on the going public decision. Oil price uncertainty has a strong negative relation to IPO volume, a one standard deviation decrease in the implied volatility results in a 25%-29% increase in the number of quarterly IPOs. The effect is concentrated among the price sensitive upstream producers. We further report that uncertainty negatively impacts the IPO withdrawal decision and increases the value to postpone the offering.

Keywords: Energy economics, IPOs, Implied crude oil volatility, Oil and gas sector, Oil price uncertainty

JEL Classification: D81, G34, Q40, Q43, Q49

Suggested Citation

Blomkvist, Magnus and Dimic, Nebojsa and Vulanovic, Milos, Oil price uncertainty and IPOs (August 31, 2021). USAEE Working Paper No. 21-522, Available at SSRN: https://ssrn.com/abstract=3917099 or http://dx.doi.org/10.2139/ssrn.3917099

Magnus Blomkvist

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Nebojsa Dimic

University of Vaasa ( email )

Wolffintie 34
Vaasa, 65200
Finland

Milos Vulanovic (Contact Author)

EDHEC Business School ( email )

24, avenue Gustave Delory
CS 50411
Roubaix, 59057
France

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