The survival and success of Canadian penny stock IPOs |
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Authors: | Cécile Carpentier Jean-Marc Suret |
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Institution: | (1) Laval University, Quebec, QC, Canada;; |
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Abstract: | We analyze the survival and success of a large sample of Canadian penny stock initial public offerings (IPOs), launched mostly
by small and unprofitable firms from 1986 to 2003. The failure rate of these IPOs is lower than in the US for larger IPOs,
probably because of lax delisting rules and the market’s capacity to refinance non-profitable firms. The survival of new issuers
is significantly associated with their characteristics at the IPO and with the level of initial listing requirement they meet.
The involvement of reputable intermediaries in the IPO process mitigates this effect. Success, estimated by the graduation
to a senior exchange, is not linked to the financial conditions at the IPO. Overall, Canada seems to have developed a particular
strategy to finance the growth of small firms even if the propensity to fail of firms listed at a pre-revenue stage is very
high. |
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