The stock market as a value multiplier: +173% – the best five-year returns for SMEs

“These are not just financial figures: they represent jobs and value distributed across the regions,” said Manetti, who added that “a stock market listing, if done properly, acts as a catalyst for real growth”. The research highlights a direct correlation between stock market performance and companies’ industrial growth, with the best-performing firms managing to combine revenue growth, increased profitability and rising employment.

In terms of market multiples, the study shows that investor selection results in significant valuation divergence. The median Enterprise Value/EBITDA multiple remains around 8 times, whilst the top-performing companies are valued at between 19 and 31 times, reflecting the market’s ability to reward sustainable growth and the quality of the business model. An analysis of price-to-earnings multiples also confirms this pattern of significant dispersion, with the market tending to concentrate market capitalisation on a limited number of high-performing companies.

Post-IPO growth is particularly evident among companies in the top 10% of the sample, which recorded a 195% increase in revenue in the five years following their listing, a 156 per cent increase in EBITDA and a 176 per cent rise in net profit. In terms of employment, these companies saw their workforce rise on average from 4,987 to 8,277 employees, representing a 66 per cent increase. Extending the analysis to the top 25 per cent, revenue grew by 102%, whilst EBITDA and net profit both increased by 203%, with the workforce rising from 13,951 to 23,845 employees, representing a 71% increase.

‘The economic impact of a stock market listing is measurable: companies in the top 25 per cent have seen their turnover double and have created 10,000 jobs. Listing thus becomes a very powerful industrial policy tool for the country’s growth and offers an alternative to resorting to debt. It is an important competitive factor, which is why we believe that greater focus on mechanisms to encourage IPOs by SMEs is essential,” explains Manetti, who adds: ‘Individual Savings Plans (PIRs), introduced in Italia under the 2017 Budget Act, have had two effects: they have brought benefits to subscribers and have enabled companies to list efficiently and effectively. We believe that a tax incentive, however small, to encourage investors to hold on to their investments – as is the case in other neighbouring markets – could act as a catalyst to support these listings. Furthermore, the European SIA initiative, which focuses on the equity market, could channel capital into listed companies, thereby supporting their growth.”

The growth observed is not solely the result of one-off transactions, but in many cases stems from organic expansion and enhanced competitiveness, often supported by the greater visibility and liquidity afforded by a stock market listing. In several cases, the research also highlights the role of post-IPO acquisitions and internationalisation processes as drivers of accelerated growth.

“The issue of delistings,” Manetti points out, “is not just an Italian one, but a European one. In our country, we are set to enter a significant phase, as over 300 billion in wealth will undergo a generational transfer by 2033. It would be important to make the stock market more accessible and attractive so that the next generation of entrepreneurs might choose to grow their businesses by listing them on the stock exchange. The legislature is moving in the right direction with measures to streamline red tape and the creation of the National Strategic Fund.”

The National Strategic Fund is dedicated to long-term investments, in partnership with other market investors, in companies with strong growth prospects, with a view to supporting their development plans. Within the National Strategic Fund, there is a dedicated arm for taking equity stakes in strategic listed companies through purchases on the secondary market, in accordance with procedures and investment frameworks agreed on a case-by-case basis with the Ministry of Economy and Finance. Specifically, the options are: a capital increase through co-investment with market investors, exceeding €25 million, which strengthens and stabilises your company’s capital base, supporting its medium- to long-term development plans; a convertible bond issue with a maturity of up to 7 years and a minimum amount of €1 million, with an option for the subscriber to redeem the bond or convert it into share capital

Another key factor concerns the size of the free float, which for the best performers stands at an average of around 42.1 per cent, with a median of 31.8 per cent – a level considered optimal for ensuring liquidity without compromising the stability of the ownership structure. The quality of pricing during the IPO phase is also a decisive factor, with the market penalising both instances of underpricing and valuations perceived as unsustainable.

The research also highlights that companies which plan external growth strategies through post-listing acquisitions tend to perform better, as do those characterised by a solid ownership structure and adequate governance. A further positive factor is the gradual increase in analyst coverage, which helps to improve the liquidity and visibility of the share.

Through econometric analyses covering time horizons of one, three and five years, the research identifies a number of recurring factors associated with superior market performance. Among these, it emerges that having overly large management teams is negatively correlated with share price performance, whilst leaner structures are generally rewarded by the market. Similarly, the presence of lock-up clauses is associated with better performance, as this is interpreted as a sign of confidence on the part of existing shareholders.

In terms of governance, the study finds that greater gender diversity and a board of directors with an average age of between 50 and 52 are associated with higher valuations, whilst the presence of directors holding multiple directorships in other listed companies has a negative impact. More generally, the research ultimately emphasises that the decisive factor remains the quality of the business plan, understood as growth potential, sound fundamentals and the competence of the management team.

Through statistical regression analysis covering a 1-, 3- and 5-year period following the IPO, the research identified the variables significantly correlated with medium- to long-term market performance. This has resulted in a ‘decalogue’ of best practices: avoid overly large management teams; include lock-up clauses; set an appropriately sized free float; avoid excessive underpricing in the initial public offering; prepare a credible acquisition plan for growth; ensure a strong and authoritative controlling core amongst shareholders; work to increase analyst coverage over time; promote gender and age diversity on the board of directors; avoid having directors who hold positions in other listed companies; maintain a sustainable competitive advantage;

Overall, the research carried out by Intermonte and the Politecnico di Milano paints a picture of a market in which a stock market listing is not merely a financial event, but a genuine process of industrial transformation. The evidence shows that the best-performing companies not only generate significantly higher returns, but also make a significant contribution to employment growth and the creation of economic value in their local areas.

“The hope is that it will guide the decisions of those entering the capital markets, helping to ensure that listing becomes a path to sustainable growth rather than merely a financial event” concluded Giancarlo Giudici, full professor at the Politecnico di Milano School of Management, emphasising that the aim is to enhance the Italia market’s appeal to new professional investors and capital specialising in mid- and small-cap companies.