Social Media Emotions and IPO Returns

Abstract

I explore how investor emotions on StockTwits and Twitter affect initial public offering (IPO) returns. High pre‐IPO enthusiasm is linked to greater initial returns but eventual long‐term underperformance. IPOs with strong early excitement average a 29.73% initial return, but suffer a −8.22% long‐term industry‐adjusted return, showing a gap between early optimism and later results. Analysis of investor communication reveals that financial language and existing information influence these outcomes. There is a growing caution among frequent IPO investors, likely due to past experiences. Despite this, firms with initial high optimism continue to attract postlaunch interest, contradicting their long‐term underperformance.