The Rate of Return of the Primary Offerings on the Example of Small Firms Listed on the Newconnect and Companies on the WSE Main Market
The Rate of Return of the Primary Offerings on the Example of Small Firms Listed on the Newconnect and Companies on the WSE Main Market

Summary/Abstract: Alternative trading system – the NewConnect was developing very dynamically in years2007–2014. The proof for that is the fastly growing number of companies which madea private placement of their shares and now are quoted on the market. In the article the researchhas been conducted with the aim to indicate the profitability of investing into enterprisesdebuting on the NewConnect in three years between 2012 and 2014. In order to makethe results more reliable, rates of return of stocks (which were the subject of IPO in the analogicperiod) 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 and153 from the NewConnect – the market for small firms. Returns have been counted for thevarious moments (dates) so as to simulate short and long-term investments. The aim of thearticle is to check what was the level of returns of stocks which have debuted on the New-Connect in the period mentioned on the background of the rates of return of IPOs from theWSE main market in the same years. Furthermore, the research hypothesis has been proposedaccording 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 presumptionof the higher risk premium in the case of enterprises with lower capitalization andthe potentially higher risk premium for illiquidity which characterizes stocks listed on theNewConnect. The analysis has been carried out on the grounds of comparative method andstatistical measures which serve to population structure description.

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