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Oil Price Uncertainty and IPOs

Magnus Blomkvist, Nebojsa Dimic, and Milos Vulanovic

Year: 2023
Volume: Volume 44
Number: Number 6
DOI: 10.5547/01956574.44.6.mblo
View Abstract

We examine the impact of oil price uncertainty on IPO volume in the oil and gas sector. By using the implied volatility of oil options, a forward-looking uncertainty measure, we identify the effect of uncertainty on the going-public decision. Oil price uncertainty exhibits a strong negative relation to IPO volume. A one standard deviation decrease in the implied volatility results in a 29% increase in the number of quarterly IPOs. The effect is concentrated among the price-sensitive upstream producers. We further report that uncertainty positively impacts the IPO withdrawal decision and increases the value of postponing the offering.

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