Ekonomiczne Problemy Usług (Jan 2015)
The rate of return of the primary offerings on the example of small firms listed on the NewConnect and companies on the WSE main maret
Abstract
Alternative trading system – the NewConnect was developing very dynamically in years 2007–2014. The proof for that is the fastly growing number of companies which made a private placement of their shares and now are quoted on the market. In the article the research has been conducted with the aim to indicate the profitability of investing into enterprises debuting on the NewConnect in three years between 2012 and 2014. In order to make the results more reliable, rates of return of stocks (which were the subject of IPO in the analogic period) listed on the regulated market of the Warsaw Stock Exchange have been calculated. Estimation have been conducted for 223 stocks: 70 from the WSE regulated market and 153 from the NewConnect – the market for small firms. Returns have been counted for the various moments (dates) so as to simulate short and long-term investments. The aim of the article is to check what was the level of returns of stocks which have debuted on the NewConnect in the period mentioned on the background of the rates of return of IPOs from the WSE main market in the same years. Furthermore, the research hypothesis has been proposed according to which private placements investments on the NewConnect should be more money-making than buying firms on IPOs on the regulated market. It has been based on the presumption of the higher risk premium in the case of enterprises with lower capitalization and the potentially higher risk premium for illiquidity which characterizes stocks listed on the NewConnect. The analysis has been carried out on the grounds of comparative method and statistical measures which serve to population structure description.
