Do Risk Factors Matter in the IPO Valuation?

The paper investigates whether all of the risk factors priced during the Internet bubble period. To answer this question, we use a unique hand collected dataset from public prospectuses for companies that issued an initial public offering during the Internet bubble period. We propose three hypotheses: 1- The risk factors mentioned in the prospectus are important for IPO trading and therefore affect IPO underpricing, 2- Risk factors affect the IPO deal attributes, and 3- The number of risk factors cited by the issuing firm is affected by direct participants such as venture capitalists and investment bankers