The Operating and SharePrice Performance of Initial Public Offerings: The UK Experience
University of Manchester - Manchester Business School, Division of Accounting Finance
University of Bergamo - SIGE Sezione di Ingegneria Gestionale
University of Bergamo
January 5, 2005
We study the post-issue operating performance of UK Initial Public Offerings. Using several measures, we find that the performance of firms going public on the Official List deteriorates significantly after the issue. On the contrary, IPO-firms on the Alternative Investment Market (AIM) use the IPO as springboard for growth without sacrificing their profitability. The AIM is, indeed, the first market where operating performance is not found to be declining after the IPO. The listing on the AIM does not affect significantly the leverage of the firms, but gives the opportunity to raise fresh funds, both at the time of the initial offering and through further (debt or equity) capital raisings. Conversely, the permanent decrease in leverage after the IPO on the Official List characterizes the flotation on this market as a mean to rebalance the firms' capital structure.
Number of Pages in PDF File: 29
Keywords: Initial Public Offerings (IPOs), going public, operating performance, long-run
JEL Classification: G32, G14
Date posted: May 24, 2005
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