Short- and Long-Term Returns on Initial Public Offerings (IPOs) in the Polish Capital Market

Abstract

The purpose of the article. The purpose of the study was to examine how the returns on shares of companies entering the Warsaw Stock Exchange as part of initial public offerings (IPOs) evolve, both in the short and long term. The study aimed to verify the hypothesis of the existence of anomalies on the main market of the WSE, consisting in the underpricing of shares in the short term and their overpricing in the medium and long term.Methodology. The basis of the study was the analysis of historical data on returns on shares issued in initial public offerings. The evaluation of the phenomenon of undervaluation of share prices from IPOs was conducted using the immediate return (IR) index and its adjusted version (AIR). In turn, simple rates of return (BHR) and abnormal rates of return (BHAR) were used to assess the overvaluation of share prices over the longer term.Results of the research. The study confirmed the occurrence of share price undervaluation during IPOs on the Polish capital market in the years 2010–2024, as evidenced by an average immediate return (IR) of 9.73%. The highest average returns in the short term were recorded in 2020, exceeding 40%, mainly due to debuts of companies from the computer games sector. In contrast, in the long term, the weakest performance, characterized by negative average returns (BHARs) in all periods studied, took place between 2019 and 2024, associated with the economic difficulties following the pandemic and the preponderance of companies making losses.