Small-caps stocks deliver top returns

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Terry Marsh, @sharon purchase and I examine IPO closing day discounts and long-term average IPO returns on the Australian Securities Exchange (ASX) over the past two decades to December 2019.

The ASX allows small/micro firms, that in other global jurisdictions, might seek private equity, venture capital or second board listing, to list on the main board exchange under standardised regulations: - regardless of IPO size, industry sector or ASX listing office. Is the early-stage listing functioning as a ‘hybrid’ substitute for VC funding?

This study shows evidence of strong small/micro-IPO returns, overall portfolio returns increasing from 1.25% to 12.95% upon inclusion of delisted IPOs, and highest post listing return differentials for listings filed in WA and the mining and tech sectors.

Period31 Jan 2022

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