Oil Price Uncertainty and IPOs

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...

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Bibliographic Details
Published in:	The Energy journal (Cambridge, Mass.) Mass.), 2023-11, Vol.44 (6), p.21-42
Main Authors:	Blomkvist, Magnus, Dimic, Nebojsa, Vulanovic, Milos
Format:	Article
Language:	eng
Subjects:	Crude oil Crude oil prices Data science Discount rates Energy economics Forecasts and trends Gas industry Going public (Securities) Hypotheses Industry forecasts Influence Initial public offerings Oil and gas industry Petroleum industry Petroleum products Prices and rates Risk premiums Uncertainty Volatility
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Summary:	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.
ISSN:	0195-6574 1944-9089