The analysis of ICO and IEO performance in the shortand long-run

Initial Coin Offering (ICO) and Initial Exchange Offering (IEO) today present themselves as fastgrowing alternatives and innovative ways to raise external financing for entrepreneurial ventures or fintech start-ups through the selling of coins directly to investors. This study analyses both the ICO and IEO in the short-and long-run. Examined are 101 ICOs listed between January 2017 and June 2021, as well as 22 IEOs listed between January 2018 and June 2021. Furthermore, the study explores various ICO and IEO performance determinants using a fixed effects regression model. The variables analysed are proxies for asymmetric information that exists between the issuing firm and investors, size was found to be the only significant variable. More so, the study finds that generally ICO and IEO are over-priced, this eventually results in coins performing poorly following aftermarket performance. Short-run performance seems to play little to no role in determining the long-run performance of newly issued coins. The results of this study suggest that the availability of white paper is not adequate to address the asymmetric information that persists between the issuing firm and investors. Lastly, using a buy-and-hold strategy the study finds that coins underperform in the long-run as given by negative abnormal returns of 35.06% after 3 years.
A dissertation submitted in fulfilment of the requirements for the degree of Master of Commerce to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, 2022
Initial Coin Offering (ICO), Initial Exchange Offering (IEO), Entrepreneurial ventures