Why Do Companies Go Public? Evidence from the Prague Stock Exchange

2019, Vol. 7, No. 1 10.15678/EBER.2019.070110 Why Do Companies Go Public? Evidence from the Prague Stock Exchange Martina Skalická, Marek Zinecker, Adam P. Balcerzak, Tomáš Meluzín A B S T R A C T Objective: In this article, we intend to contribute evidence in regard to going public motivation on a sample of companies that launched an IPO at the Prague Stock Exchange between 2004 and 2017. Research Design & Methods: In order to evaluate the prevailing motives for the IPO launch, we design and apply a set of composite indicators the values of which may be understood as an indication of the extent to which IPO launch motives originate in the zone of the issuing company’s needs or in the zone of interest of its owner (owners). Findings: Our main conclusion is that the dominant going public motivation is to allow current shareholders to cash out and to enhance the company´s publicity and image. Implications & Recommendations: Since the study disclosed that the prevailing motive of primary issues at the Prague Stock Exchange was the exit of investors and enhancing publicity and image we suggest that companies launching the Prague Stock Exchange in recent years were predominantly determined by non-financial aspects. Thus, the research findings represent substantial implications for issuers, investment bankers, the stock exchange, and macroeconomic policy makers when the concept of incentive schemes how to increase the attractiveness of the local capital market will be proposed. Contribution & Value Added: Our set of composite indicators allows to assess not only the predominant IPO motive zone, but also measure the intensity of the motives. This helps to understand better the urgency of the needs of the issuing companies satisfied by the IPO implementation. Article type: research article Keywords: Financial Economics; IPO; Prague Stock Exchange; IPO motivation JEL codes: G32, G29 Received: 6 November 2018 Revised: 15 December 2018 Accepted: 4 January 2019 Suggested citation: Skalická, M., Zinecker, M., Balcerzak, A.P., & Meluzín, T. (2019). Why Do Companies Go Public? Evidence from the Prague Stock Exchange. Entrepreneurial Business and Economics Review, 7(1), 181199. https://doi.org/10.15678/EBER.2019.070110 182 | Martina Skalická, Marek Zinecker, Adam P. Balcerzak, Tomáš Meluzín INTRODUCTION There is a generally shared definition that an initial public offering (IPO) is the very first sale of stocks to the public to raise capital, which allows the corporation to conduct a substantial expansion of its business activities. IPO implementation in its nature means raising external financing that is very often seen as a manner how to reduce leverage and thus bankruptcy risk as going public increases the equity ratio (e.g. Myers, 1984; Breinlinger & Glogova, 2002; Kljucnikov & Belas, 2016; Michalak, 2016; Ivanová, 2017; Valaskova, Kliestik, & Kovacova, 2018; Mackevičius, Šneidere, & Tamulevičienė, 2018; Zemguliene & Valukonis, 2018). Even after almost thirty years after the beginning of the economic transformation, the Czech capital market has remained underdeveloped compared to its well-developed counterparts in the European Union (Berk & Peterle, 2016; Lyócsa, 2014). The financial market has been dominated by banks and the Prague Stock Exchange (PSE) has failed to fulfil one of the primary tasks the stock markets traditionally play, i.e. it fails to function as a place where companies would launch primary issues to raise equity (Meluzín, Zinecker, & Lace, 2016; Balcerzak, Kliestik, Streimikiene, & Smrčka, 2017). The issue of external IPO drivers in the context of the Prague Stock Exchange (PSE) has been addressed, for instance, by Meluzín et al. (2017, 2018 a, b), Peterle and Berk (2016), Meluzín and Zinecker (2014), Lyócsa (2014) and Roženský (2008). These studies have emphasized that a small number of primary issues at the PSE is caused by the low liquidity of the domestic capital market as only a small volume of issues has been actively traded. Moreover, the current excess of liquidity in the banking sector resulting in accessible and cheap loans and financing provided by foreign parent companies have been discussed. Firm-specific factors represent another category of factors that might motivate a company to go public or deter it from launching public equity markets (Skalická Dušátková, Zinecker, & Meluzín, 2017). The phenomena of information asymmetry, information disclosure, losing control over the company or IPO failure risk have received fairly substantial support in the academic studies (Myers, 1984; Myers & Majluf, 1984; Chemmanur & Fulghiery, 1999; Fontinelle, 2015; Isniawati, Rahmawati, & Gunardi, 2018). In a survey based study, Meluzín, Zinecker and Lace (2016) deliver evidence that the most important IPO motivations among Czech companies include enhanced publicity and reputation and establishment of the firm´s market value. Surprisingly, Czech companies do not feel motivated by raising external equity capital. In this article we aim to contribute evidence in regard to going public motivation on a sample of companies that launched an IPO at the Prague Stock Exchange between 2004 and 2017 (initially, 2004 is the year when the first IPO was carried out at the PSE). This article differs from previous studies by the chosen research methodology consisting in designing and applying an original decision tree and a set of composite indicators, which serve as a tool for identifying whether the reason for the IPO launch is located in the investor’s or the issuer’s zone and whether the motives of the surveyed entities are of a financial or non-financial nature. The research questions of this study are based on the motives of the IPO discussed in the academic literature and their insufficient mapping in the context of the Czech capital market. The research questions are as follows: In the case of the companies carrying out the IPO in the context of the Czech capital market, have there been predominant motives Why Do Companies Go Public? Evidence from the Prague Stock Exchange | 183 on the side of the issuer or its owner (owners)? Were the IPOs primarily motivated by raising capital or by reasons of non-financial nature? We believe that the research results presented in this study will be of particular benefit to the stock exchange when formulating a strategy to increase the attractiveness of the organised capital market for issuers and investors. For the same reason, the results are inspiring for legislative and executive institutions, as a functioning capital market is undoubtedly a tool for increasing the country’s economic potential, as stated in the ‘Entrepreneurship 2020 Action Plan’, approved by the European Commission (2012). The rest of this article proceeds as follows. First, we provide an overview of the methodological approach. Next, we calculate financial ratios and interpret research findings. The final sections discuss and summarise the main conclusions. LITERATURE REVIEW Recently published studies on external factors that may have influence on IPO decision making examine explanatory power of GDP and industrial production growth, interest rates, sentiments on financial markets and regulatory constraints (e.g. Rydqvist & Högholm, 1995; Ljungqvist, 1995; Ritter, 2011). Detailed academic research on IPO drivers on firm-specific level suggests that the decision to go public arises from corporate characteristics (size, age, the industry market-to-book ratio), as well as from the consequences public offerings have for investment and financial behaviour (Pagano Panetta, & Zingales, 1998; Breinlinger & Glogova, 2002). It should be remembered that these factors can differ depending on the region according to the degree of knowledge and information, as well as the efficiency of communication for the existing financing methods, as mentioned by Nicolescu and Tudorache (2017). In this context, the issue of financing or raising capital for projects through different strategies is one of the basic problems of corporate financial management (Vasilescu, Dima, & Vasilache, 2009). According to the pecking-order theory (Myers, 1984; Myers & Majluf, 1984), raising capital via IPO comes into consideration when retained earnings, the financial resource with the lowest cost of capital and zero adverse-selection problems, and external capital in the form of bank loans have been exhausted. Thus, going public is interpreted as the last option how to raise capital as the cost of equity including IPO funds has been considered to be higher than the cost of debt financing (e.g. Pratt & Grabowski, 2008). The range of motives for the IPO launch may be, however, much broader than just ‘merely’ securing capital resources for further development. IPO objectives may not be of immediate financial nature. Helwege and Liang (2004) report that the IPO might also represent a form of the full or partial exit of the current owners who invested in the company at an early stage of its development, e.g. in the role of business angels or venture capitalists. A number of other studies indicate that the motives for the IPO launch may consist of trying to build public relations; this includes, for instance, the company’s visibility in the media, the formation of the desired perception of the company in the public eye, or influencing the perception of the business sector in relation to its viability and risk (Brau, Francis, & Kohers, 2003; Maksimovic & Pichler, 2001; Mentel, Brożyna, & Szetela, 2017). A possible IPO motive may consist in optimising the assets portfolio of the existing owners who retain control in the company, yet selling part of their shares allows them to release their capital tied up in the shares of the issuing company and subsequently used for other investments, 184 | Martina Skalická, Marek Zinecker, Adam P. Balcerzak, Tomáš Meluzín repayment of debt, paying off the minority shareholders, etc. (Paeglis & Veeren, 2013). As one of the motives of the IPO launch, Sullivan (1965) also mentions the possibility of using the issue proceeds for future mergers and acquisitions, extending the options to obtain additional financing in the future or increasing the attractiveness of the company when recruiting managerial talent through share options. From the perspective of the existing shareholders, the creation of a market with the shares of the issuing company serves as an important motive, resulting in increased liquidity (Kim & Weisbach, 2008). A number of studies emphasise the fact that IPOs are more common in fast growth sectors (Helvege & Liang, 2004). The reason for the IPO launch may thus consist in the urgent need to make the necessary investments (or acquisitions) to maintain a position in the growing market and at the same time to reduce the risk carried by the current owners, as the rapid development of the industry / business usually reduces the capacity to predict further developments with sufficient precision. Pagano et al. (1998) believe that the reason for the IPO does not simply lie in the financing of development investments; the primary motive is seen particularly in the effort to rebalance the capital structure of the company following a period of high investment and dynamic development. Pagano et al. (1998) further emphasise that going public improves the bargaining position towards banks and reduces debt costs as well as the share of bank finance in the capital structure. Auret and Britten (2008) emphasise that IPO yields are often used to repay existing debts. Among other things, Brau, Francis and Kohers (2003) assume that the reason for the IPO launch may also include a fragmented ownership structure increasing the premium when taking over the company. Pagano et al. (1998), Brau and Fawcett (2006), Meluzín and Zinecker (2014), and Meluzín et al. (2016, 2018a,b) summarise the motives for the IPO launch as follows: they consider the financial motive to be the most frequent one, i.e. obtaining the funds for the purposes of development investments, acquisitions or financial restructuring. What is also equally important are non-financial motives stemming from the efforts to strengthen the bargaining position towards banks, increase the visibility of the company and raise the liquidity of the company shares. The novelty of this study is twofold. On the one hand, it presents empirical evidence in regard to going public motivation on a sample of companies that launched an IPO at the Prague Stock Exchange in the last two decades. On the other hand, in this article we adjust and complement existing methodological approaches how to asses IPO motives by designing an original decision tree and a set of composite indicators. MATERIAL AND METHODS The research sample consists of IPOs carried out by private-sector business entities at the PSE in the period of 2004-2017. The year 2004 serves as the starting point of the research, as no primary issue was carried out at the PSE until 2004. The total number of IPOs realised at the PSE reached 11. Appendix A summarises the key characteristics of the conducted IPOs. The source of data for analysis includes, in particular, the prospectuses of the issuers and their financial statements in the period before and after implementing the IPO. The data was taken from the Bloomberg database (2018). In addition to the methods specified below, the applied analytical methods include the content analysis of the documents, the analysis of the selected financial indicators, and the comparison method. Why Do Companies Go Public? Evidence from the Prague Stock Exchange | 185 Based on the literature dealing with the factors influencing the IPO implementation (e.g. Röell, 1996; Rydqvist & Högholm, 1995) and the results of the previous empirical studies in the context of the Czech Republic (Meluzín, Zinecker, & Lace, 2016), we defined a set of variables serving as a tool for identifying the reasons for the IPO launch using a sample of the examined companies. The results are subject to comparison with the officially declared prospectuses of individual issuers. The development of selected variables (financial indicators) was examined up to two years before and two years after the IPO launch. Specifically, this includes the variables of ‘Leverage’, reflecting the development of the balance sheet total to equity, ‘Size’, reflecting the development of the balance sheet sum, ‘Investment’, expressing the development of long-term fixed assets, ‘Currencies’, expressing cash development, ‘Loans’, reflecting the development of interest-bearing debt, and ‘Growth’, expressing the development of sales. Table 1 summarises the examined variables and their calculation. Table 1. Summary of examined variables and their calculation Variable Definition/Calculation Leverage (t - 1) assets (t - 1) /book value of equity (t - 1) Leverage (t+1) assets (t+1) /book value of equity (t+1) Size assets (t+1) /assets (t-1) Investment fixed assets (t+1)/ fixed assets (t - 1) Currencies currencies ( t+1)/ currencies (t - 1) Bank loans (t+1) /loans (t-1) Growth (t-1) revenues (t-1) /revenues (t-2) Growth revenues (t+1) /revenues (t - 1) Growth (t+1) revenues (t+2) /revenues (t+1) Source: own study. The low index (t) in the previous table indicates the moment (year) of the IPO launch; the index (t-1) indicates the time of the last financial statements prior to the IPO implementation, and the index (t+1) indicates the time of the financial statements immediately following the IPO launch. By analogy, the low indexes (t-2) and (t+2) indicate the dates of the second annual financial statements prior to / following the IPO implementation. However, the size of the change in these indicators is not always a tool for identifying real motives on the part of the issuers. These are cases where actual intentions on the part of the issuers have not been fulfilled (see, for example, the lack of interest in the issue of Pivovary Lobkowicz Group or a sharp change in market conditions in the case of AAA AUTO Group N.V.). Thus, the intentions of issuers often face up to the constraints imposed by the development of external conditions. Therefore, for the purposes of assessing the IPO launch motives, we did not limit ourselves only to the parameters of the IPOs, but we also focused on the parameters defined in the issuer’s prospectuses (which may not have always been completely fulfilled). For this reason, the scope of our interest also includes studying the issuers’ declarations (included in the prospectus) on the expected use of the capital raised by selling the shares. The evaluated information for assessing the reasons for the IPO launch included the issue structure (planned and actual), i.e. the portion of the offer of primary or secondary shares in the total offer. 186 | Martina Skalická, Marek Zinecker, Adam P. Balcerzak, Tomáš Meluzín In the first phase, we focused on the question whether the motive for the IPO launch lay primarily in the issuer’s zone or in the zone of its owner (having an influence on the issuer). On the basis of relevant literature and interviews with experts, the set of indicators shown in Table 1 was supplemented with the indicators evaluating the issue structure (Table 2). The assumed values of the indicators (at this stage expressed only by the range of assumed values) were assigned the source of the motive (in the issuer’s zone or in the zone of its owner). Table 2. IPO structure indicators Indicator Indicator value Related motive Share of secondary stocks in the IPO value High Motive in the owner’s zone Low or zero Motive in the issuer’s zone Share of secondary stocks held by current shareholders before the IPO launch High Motive in the owner’s zone Low Motive in the issuer’s zone IPO offer reduction in the section of primary stocks – Motive in the owner’s zone IPO offer reduction in the section of secondary stocks – Motive in the issuer’s zone Increasing the number of stocks after the IPO High Motive in the issuer’s zone Source: own study. In order to assess the prevailing motives of the IPO launch, we proceeded using the following decision-making tree (Figure 1). Figure 1. Decision-making tree for determining the prevailing motive of the IPO launch Source: own elaboration. In order to answer the question on the first level of the decision-making tree, the composite indicators were defined combining three partial indicators as follows:    =  IPO Share  ∗  IPO Size  ∗  IPO Reduction  (1) The first indicator is the portion of primary and secondary shares in the IPO value (IPO Share). The indicator may acquire the values in the interval of <0;1>. The portion of secondary shares in the total offer is calculated as follows: Does theIPO motive lie in the sphere of the issuer or its owner? Motive in the issuer’s sphere What is the issuer’s motive? Motive in the owner’s sphere What is the owner’s motive? Why Do Companies Go Public? Evidence from the Prague Stock Exchange | 187 #$% & ℎ  = (( ) /  (( ) + (( ,  (2) where: (( ) - the number of primary shares; (( , - the number of secondary shares. The second indicator represents the importance of the offer of primary or secondary shares. The basic measure consists in the number of shares already issued, to which the number of new shares in the primary offer and the number of shares sold by the investor are measured. The portion of secondary shares in the total offer may acquire the values from the interval <0;1>. The ratio between the number of primary shares and the number of shares already issued may acquire the values higher than one. Since realising the offer of primary shares also implies the abandonment of part of the control over the company by the original owners but to a lesser extent (a primary offer of 100% of the original shares means a loss of control of 50% of the voting rights; 200% of the original shares represents a loss of 2/3 of the voting rights), the intended size of the portion of the primary shares offer is normalised with respect to the number of shares before the IPO at the interval <0;1). The loss of control is expressed as follows: #$% &- = . ) /  . ) + 1  (3) where: #$% &- - the normalised size of the offer of primary shares in relation to the original number of shares before the IPO; . ) - the portion of the offer of primary shares in the total number of shares before the IPO. The third indicator used for determining the IPO importance in terms of the existing owner or issuer is the manner of reducing the issue volume in the case of insufficient demand of subscribing investors. The level of insufficient interest may be expressed as the share of the actually sold shares within the IPO and the maximum intended number of sold shares within the IPO. This total level of insufficient interest in the IPO by subscribing investors may then be compared with the allocation of the subscription between the offer of primary and secondary shares (a higher reduction share in one part of the offer expresses a higher interest in the realisation in the second part of the offer). The share of the reduction in the part of the offer of primary shares and the total IPO offer may acquire the value in the interval <0;∞): 012  ( 3 (( =  ) /  4 (4) where:  ) - the ratio of the actually subscribed primary shares in the total offer;  4 - the ratio of the actually subscribed shares in the total offer. The value 1 corresponds to the balanced reduction (in the same ratio) in the offer of primary shares and in the total IPO offer. Normalising this ratio to the interval <0;1) corresponding to other indicators will be reached by dividing the value of the indicator with itself and adding the value 1 in the denominator. The value 0.5 corresponds to the fact that satisfying the offer of primary (or secondary) shares is the same as satisfying the offer within the whole IPO; the values under 0.5 correspond to a lower allocation in the segment of the primary shares offer, while the values above 0.5 correspond to a higher allocation 188 | Martina Skalická, Marek Zinecker, Adam P. Balcerzak, Tomáš Meluzín in the segment of the primary shares offer. Following the adjustments, the normalised indicator may be recorded as follows: #$% 012 =  ) / 5  ) +  4 6 (5) The combination of the three parameters specified above indicates whether the motivation for the IPO launch lies on the side of the issuing company or on the side of the selling investor. Offers of primary and secondary shares compete with each other. Increasing the number of shares in one of the offers jeopardises the successful implementation in the second part of the offer. Therefore, the share of individual offers in the total offer was monitored. The importance of the offer of the primary shares for the issuing company and the offer of the secondary shares for the existing owner is evaluated on the basis of the size of the existing owner’s share before the IPO and the size of the issue. The ratio of offers to the size of the issue is used for this purpose. In the event that the issuer faces a limited interest in the offer, they decide which parts of the offer of shares (primary or secondary) should be given priority. In this case, it is an ex post indicator of the ‘IPO importance’. Reducing the offer satisfaction in one of the segments indicates the importance of the IPO to satisfy the interests in the second segment. We define the indicator of the power of interest on the issuer’s side (I p ) as follows: # ) = (( ) (( ) + (( , ∗ . ) . ) + 1 ∗  )  ) +  4 (6) By analogy, we define the indicator of the power of interest on the investor’s side I s on the basis of the following formula: # 7 = (( , (( ) + (( , ∗ . ) ∗  ,  , +  4 (7) Following the identification of the prevailing zone of the motive for the IPO launch (in the sphere of the issuer or the owner), the assessment focuses on the development of selected financial indicators of the issuing company (Table 1). This results in identifying the prevailing motive for the IPO launch, i.e. whether it is related to the issuing company or its owner. More specifically, attribution of motives is based on the ex post analysis of financial indicators and on the assumption that the indicators that changed significantly after the IPO launch could have been affected by the IPO or vice versa, their pre-IPO values led to the decision to carry out a primary share issue. RESULTS AND DISCUSSION In order to assess the primary motive of the IPO launch, i.e. whether it is located in the zone of the existing owners or the issuing company, we assessed the share of the planned offer of primary and secondary shares in the total issue. Table 3 (line 5) shows the ratio of the offer of primary shares. The table also contains further information on planned and actual parameters of the examined IPOs. On the basis of the values of the indicators specified in Table 4, we assess whether the motives of the IPO implementation at the PSE in 2004-2017 prevailed in the zone of the issuing company or in the zone of the investor. The results specified in Tables 3 and 4 imply that the motive to offer primary shares was the strongest in the case of the following companies: ECM, AAA and VGP. On the Why Do Companies Go Public? Evidence from the Prague Stock Exchange | 189 other hand, the motive to offer secondary shares was the strongest in the case of the following companies: companies Moneta, E4U, Fortuna and NWR. The balance of the motives may be identified in the case of: Pegas or Lobkowicz and Zentiva. A weak motive of the IPO implementation both on the side of the issuer and the existing owner may be identified in the case of the Kofola Company. Table 3. Research results – IPO parameters at the PSE (plan vs. reality, in per cent) Issuing Company Moneta E4U Lobkowic Pegas NWR Fortuna Zentiva ECM Kofola VGP AAA IPO year (20..) 16 10 14 06 08 10 04 06 15 07 07 Parameter: Plan Sale of the owner’s share 51 49 36 3 5 28 28 19 13 4 0 0 Sale of the share in the overallotment 59 49 45 44 33 32 25 13 9 0 0 Ratio of the primary shares offer in the issue value 0 0 40 44 16 13 43 80 25 100 100 Ratio of the primary shares offer in the issue value in the overallotment 0 0 35 62 14 11 38 82 13 100 100 Increase in the number of shares 0 0 25 27 5 4 15 52 1 22 36 Increase in the number of shares in the overallotment 0 0 25 27 5 4 15 57 1 25 39 Reality Sale of the owner’s share 59 49 2 44 33 32 25 13 6 0 36 Ratio of the primary shares offer in the IPO value 0 0 91 36 14 11 38 82 18 100 100 Increase in the number of shares 0 0 25 24 5 4 15 52 1 24 36 Share of the original shareholders in the registered capital after the issue 41 51 78 45 64 65 66 57 93 81 74 Fulfilling the IPO intention (Yes/No) Y Y N Y Y Y Y Y Y Y Y Source: own study. Table 4. Zone of the IPO motive at the PSE (plan vs. reality) Indicator Moneta E4U Lobkowicz Pegas NWR Fortuna Zentiva ECM Kofola VGP AAA I p – issuer’s interest 0 0 0.06 0.08 0 0 0.03 0.23 0 0.13 0.20 I s – owner’s interest 0.29 0.25 0.04 0.09 0.14 0.14 0.08 0.01 0.04 0 0 I p -I s -0.29 -0.25 0.02 -0.01 -0.14 -0.14 -0.05 0.22 -0.04 0.13 0.20 Source: own study. In the case of Moneta and E4U, the ratios of the planned offer of primary and secondary shares obviously indicate that the primary motive of the IPO launch was in the zone of the existing owner (shareholder). In the first case, 51% share of the original owner is sold, and in the second case 49% share of the original owner is sold without offering any primary shares. On the contrary, the primary IPO motive in the issuer’s sphere may 196 | Martina Skalická, Marek Zinecker, Adam P. Balcerzak, Tomáš Meluzín Meluzín, T., Zinecker, M., & Lace, N. (2016). 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Balcerzak, Tomáš Meluzín Appendix A: Main characteristics of the IPOs carried out at the PSE in 2004-2017 IPO characteristics Issuing companies Zentiva ECM Pegas AAA VGP NWR Fortuna E4U Lobkowicz Kofola Moneta IPO date 28/06/ 2004 07/12/ 2006 18/12/ 2006 24/09/ 2007 07/12/ 2007 06/05/ 2008 22/10/ 2010 25/08/ 2011 28/05/ 2014 02/12 /2015 6/5/ 2016 Offer character Combined Combined Combined Primary Primary Combined Combined Secondary Combined Combined Secondary IPO structure (subscriptions of shares in thousands) Primary shares 4,329.90 1,275.00 1,810.00 17,757.8 3,278.69 13,500.0 2,000.00 0.00 2,300.00 275.0 0.00 Increase option 0.00 127.50 0.00 0.00 304.36 0.00 0.00 0.00 110.00 0.00 0.00 Secondary shares 5,670.10 315.03 2,575.00 0.00 0.00 69,513.3 13,830.0 1,171.90 0.00 825.0 260,610 Increase option 1,500.00 0.00 657.75 0.00 0.00 12,452.0 1,194.67 0.00 0.00 400.0 33,113 Subscribed shares (total) 11,500.0 1,717.53 5,042.75 17,758 3,583.05 95,465.4 17,024.7 1,171.90 2,410.00 1,500 293,723 No of shares before the IPO 33,806.3 2,460.00 7,419.40 50,000.0 15,000.0 250,240 52,000 2,391.64 9,388.00 22,02 0 511,000 No of shares after the IPO 38,136.2 3,862.50 9,229.40 67,757.9 18,583.1 263,740 54,000 2,391.64 11,797.5 22,29 5 511,000 Free float (%) 30.16 44.47 54.64 26.21 3.28 36.20 35.00 49.00 20.62 6.72 51.00 Structure of investors(%), IPO costs and underpricing Institutional 100.00 90.00 90.00 61.00 - 90.00 90.00 - 44.00 83.00 96.70 Retail 0.00 10.00 10.00 39.00 17.00 10.00 10.00 - 56.00 17.00 3.30 Issue price (€/share) 15.21 47.00 27.00 2.00 15.25 16.56 4.29 3.30 5.83 19.83 2.52 Issue size (thousands €) 174,915 80,723.9 136,154 35,515.7 54,641.5 1,580,906 72,952 3,868.45 14,052.5 29,737 739.199 Direct IPO costs (%) 6.60 6.86 7.28 6.76 9.00 5.61 2.74 1.28 5.03 4.87 0.32 Underpricing (%) 4.01 11.70 4.52 0.05 2.30 7.55 0.45 8.00 1.75 0.98 0.07 Source: own elaboration based on prospectus reports. The copyediting and proofreading of articles in English is financed in the framework of contract No. 845/PDUN/2018 by the Ministry of Science and Higher Education of the Republic of Poland committed to activities aimed at science promotion. Why Do Companies Go Public? Evidence from the Prague Stock Exchange | 199 Authors Contribution share of authors is as follows: Martina Skalická (50%), Marek Zinecker (20%), Adam P. Balcerzak (15%) and Tomáš Meluzín (15%). Martina Skalická Martina Skalická is an assistance professor at the Brno University of Technology, Faculty of Business and Management. Her research interests include corporate economics, in particular private and public equity. Correspondence to: Martina Skalická, Brno University of Technology, Faculty of Business and Management, Kolejní 2906/4, 612 00 Brno, Czech Republic, e-mail: [email protected] ORCID http://orcid.org/0000-0002-4985-554X Marek Zinecker Marek Zinecker is an associate professor at the Brno University of Technology, Faculty of Business and Management. His research interests include macroeconomics and international economics. Correspondence to: Marek Zinecker, Brno University of Technology, Faculty of Business and Management, Kolejní 2906/4, 612 00 Brno, Czech Republic, e-mail: zin[email protected] ORCID http://orcid.org/0000-0003-1764-0904 Adam P. Balcerzak Adam P. Balcerzak is an assistance professor at the Nicolaus Copernicus University, Faculty of Economic Sciences and Management. His research interests include macroeconomics and financial markets. Correspondence to: Adam P. Balcerzak, Nicolaus Copernicus University, Faculty of Economic Sciences and Management, ul. Gagarina 13A; 87-100 Toruń, Poland, e-mail: [email protected] ORCID http://orcid.org/0000-0003-0352-1373 Tomáš Meluzín Tomáš Meluzín is an associate professor at the Brno University of Technology, Faculty of Business and Management. His research interests include corporate economics and capital markets. Correspondence to: Tomáš Meluzín, Brno University of Technology, Faculty of Business and Management, Kolejní 2906/4, 612 00 Brno, Czech Republic, e-mail: [email protected] ORCID http://orcid.org/0000-0001-5238-5166 Acknowledgements and Financial Disclosure The article came into being within the project no. 2016/1 entitled ‘Analysis of Relations among Capital Markets of the European Union Countries’ financed by the Institute of Economic Research Toruń, Poland, and Brno University of Technology, Faculty of Business and Management, Czech Republic conducted in the years 2016-2018. We are grateful to the editor and to two anonymous referees whose comments significantly improved the paper. Copyright and License This article is published under the terms of the Creative Commons Attribution – NoDerivs (CC BY-ND 4.0) License http://creativecommons.org/licenses/by-nd/4.0/ Published by the Centre for Strategic and International Entrepreneurship – Krakow, Poland