@article{e786d3ec72ad43648e54218bba0f5d96,
title = "The pricing and performance of supercharged IPOs",
abstract = "This study examines a new form of initial public offerings, {"}supercharged{"} IPOs, where a firmorganized pre-IPO as a pass-through entity undergoes a series of transactions that steps-up the adjusted tax basis of the IPO firm's assets. This step-up imposes tax liabilities on pre-IPO owners, but also creates significant future tax benefits for the firm; the average anticipated deferred tax asset is $486 million ($13 per share) for our sample of supercharged IPO firms. Pursuant to tax receivable agreements, supercharged IPO firms pay a large portion of these tax benefits to pre-IPO owners as they are realized in the future. Future firm performance must be sufficiently strong for the IPO firm and the pre-IPO owners to realize the future tax benefits created by the supercharged transaction structure. We hypothesize and provide evidence of higher IPO offer prices and stronger future performance for supercharged IPO firms relative to traditional IPO firms.",
keywords = "Deferred tax assets, Supercharged IPO, Tax receivable agreement, Up-C",
author = "Alexander Edwards and Michelle Hutchens and Rego, {Sonja Olhoft}",
note = "Funding Information: All authors gratefully acknowledge helpful comments from Anne Beatty, Sam Bonsall, James Chyz, Dave Guenther, Erin Henry, Jeff Hoopes, Linda Krull, Steve Matsunaga, Lillian F. Mills (editor), James Myers, Linda Myers, Kyle Peterson, Gregg Polasky, Gord Richardson, Steven Savoy, Max Todtenhaupt (discussant), Andy Van Buskirk, Jaron Wilde, Ryan Wilson, Wuyang Zhao, two anonymous referees, seminar participants at The Ohio State University, University of Oregon, The University of Tennessee, University of Toronto, the 2016 University of Munster Capital Markets Conference, and 2016 The University of Texas at Austin Tax Readings Group. We are also grateful for the research assistance provided by Junwei Xia and Stefan Mitrovic. Alexander Edwards acknowledges the financial support of the Social Sciences and Humanities Research Council of Canada and the University of Toronto Rotman School of Management. Michelle Hutchens is thankful for financial support from the Indiana University Kelley School of Business and the University of Illinois Gies College of Business. Sonja Olhoft Rego appreciates financial support from the Kelley School of Business and the Deloitte Foundation. Publisher Copyright: {\textcopyright} 2019 American Accounting Association. All rights reserved.",
year = "2019",
doi = "10.2308/accr-52304",
language = "English (US)",
volume = "94",
pages = "245--273",
journal = "Accounting Review",
issn = "0001-4826",
publisher = "American Accounting Association",
number = "4",
}