Graduation and sell-out strategies in the Alternative Investment Market
Why have thousand companies listed on junior stock markets such as the Alternative Investment Market (AIM)? The controversial evidence on survival and productivity growth of the AIM-listed companies, together with the recent increase in post-IPO sales worldwide suggest that growth motives are far less essential than the attainment of entrepreneurial exit opportunities. Insights on the strategic motivations behind stock market quotation are provided in this article by comparing the characteristics of AIM-listed companies involved in two trajectories, namely graduation and post-IPO company sales. Estimates of discrete choice and duration models outline the relationship between the probabilities of AIM-listed companies to be acquired or to graduate to the LSE main market and their size, age, and sector between 1995 and 2009. The results show that the AIM has mainly acted as a “show room” for the sale of its larger and older companies, especially after the Internet bubble: companies in high-tech sectors featured prominently among graduates in the late Nineties, but not among takeovers. As such, the AIM has not been a facilitator for young and small innovative firms, or it has mainly attracted those wishing to retain independence.
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