Green Versus Gray Initial Public Offerings: Ownership, Withdrawal, and Post-IPO Performance

Using a unique European dataset, we examine “green” (renewable energy) and “gray” (non-renewable energy) IPOs in terms of ownership characteristics, withdrawal probability, post-withdrawal survival, and post-IPO performance. We find greater private equity and venture capital involvement and higher levels of retained ownership for green IPOs. Gray firms prefer London’s AIM, known for lighter regulation. Green firms are less likely to withdraw in recent years, survive longer, and are less likely to be sold post-withdrawal. These results, indicating a positive market and “insider” sentiment toward green firms, suggest insiders of gray firms are more often motivated by “exit” desires. Initially, green IPOs underperform with more negative BHARs and lower alphas. However, over time, this underperformance decreases due to increased institutional ownership and a higher return “reward” for greater business risk. JEL Classification: G24, G34, Q56