Abstract

The purpose of this paper is to empirically examine the valuation process of biotechnology IPO(Initial public offering) firms. In particular, the paper investigates various valuation methods that are used in the valuation process of biotechnology firms. The results show that most biotechnology IPO firms use price－multiple methods, in particular, PER or EV/EBITDA to value IPO shares. In general, the absolute valuation method prescribed by the regulation tends to undervalue IPO share price compare to the share price estimated by the price－multiple methods. When IPO firms use the absolute method, the bookbuilding process does not play its role of collecting information and fails to reflect revealed information into adjusting offer prices properly. In contrast, the results show, when IPO firms use the price－multiple methods, the bookbuilding process works well in collecting information and reflects revealed information into offer price.

Keywords

• Biotechnology firms
• IPO(Initial public offering)
• Book－building
• band
• price for the offering
• Intangible asset

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