The valuation of firms listed on the nuovo mercato: the peer comparables approach

In this contribution we study the peer comparable approach used for the valuation of companies that went public on the Italian Nuovo Mercato. In Italy, IPO prospectuses often report the valuation methods used by investment banks. This allows us to analyse the accuracy of ‘real-world’ valuation estimates. We show that underwriters rely on price-to-book and price-earnings multiples. The valuation estimates generated by these multiples are closest to offer prices. Conversely, when using enterprise value ratios comparable firms’ values are typically higher than those of the firms going public. We argue that underwriters have the possibility to select comparables that make their valuations look conservative