The role of trademarks in going public

This study examines the importance of valuable trademarks as a quality lever for firms raising capital during and shortly after their Initial Public Offering (IPO). Based on a sample of 2,275 US IPOs, we find that high-value trademarks leads to higher underpricing. This finding is more pronounced for service firms than product firms and also in competitive industries. A post-IPO analysis confirms that particularly high-value trademarks are important assets in a firm's valuation. Issuers with more valuable trademarks can survive longer in the public domain, realizing superior post-IPO performance in terms of higher abnormal returns and market value creation. Finally, high-value trademarks enables issuers to raise more equity capital sooner through Seasoned Equity Orderings (SEOs) compared to their peers. • Higher underpricing at the IPO is a strategy for high-value trademarking issuers. • Superior post-IPO performance for high-value trademarking issuers. • Information revelation and market feedback are potential mechanisms at work. • Managers should intensify their efforts to own valuable trademarks prior to IPO.