The going public decision: evidence from the IPOs in Italy and in the UK

Anglo-Saxon financial systems are very different from those of Continental Europe, where equity markets appear less developed in relation to the scale of the economy. In this perspective, the comparison between Italy and the UK provides one of the most striking contrasts. Although the economies of the two countries are similar in scale, the Italian equity market, managed by Borsa Italiana, is quite small compared to the London Stock Exchange. This paper identifies some of the determinants of the low propensity of Italian firms to go public by comparing the IPOs in Italy and in the UK, both on the Alternative Investment Market (AIM) and on the LSE Main Market. We consider both placings and public offers.The first part of the study highlights the differences in relation to the offer methodologies (placing are definitely more frequent in the UK), the industrial composition of the sample of IPOs (that reflects the differences in the industrial structure of the economies) and the ownership structure at the IPO (most of the companies going public on the AIM offers only newly issued shares). The second part investigates the aftermarket, analysing the rate of delistings (more common in the UK, in particular due to takeovers) and the evolution of the main financial indicators, whose differences between markets are more limited. The level of profitability changes almost in the same way, with a reduction both in Italy and on the LSE. On the latter, firms use the IPO to rebalance their leverage, while it is used to gain access to additional debt in Italy and on the AIM.