We examined IPO discounts and average returns for all available ASX (de)/listed IPOs from 1999 to 2019. We found that the average 18.45 percent offering discount was close to that observed in the US, as were the discount time series behaviour and distribution. Furthermore, the average annualised return on a market‐weighted portfolio of the ASX small/microcap IPOs, from close‐of‐listing‐day price to delisting or 31 December 2019, is 18.62 percent compared to 2.28 percent for large‐caps. Small/microcap post‐listing return differentials were highest for listings filed in Western Australia, and for the metals and mining and software industries.

This study examines differentiated financial risk tolerance attitudes between three listing branches within the Australian Securities Exchange’s (ASX) standardised listing environment. Western Australia’s (WA) concentration of earlier‐stage IPOs (51% of all ASX small, (predominately mining) initial public offerings (IPOs)) appears to reflect a localised ‘entrepreneurial’ risk attitude towards smaller, higher‐risk transactions, comparative to New South Wales and Victoria . Our mixed method approach identifies that the concentration of small‐cap, capital raising experiences that are (in)/formally shared through key ‘gatekeepers’, shape locally adopted funding capabilities, business processes, and risk attitudes. Underlying risk attitudes were influenced by the shared confidence in the recognition and management of risk, thereby increasing the propensity to participate in more speculative opportunities, and WA’s presumptive higher risk tolerance.

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PurposeAustralian Securities Exchange (ASX) initial public offerings (IPOs) are an important source of early-stage capital and have also driven a substantial increase in main-board listed companies post-millennium. By contrast, Australian venture capital (VC) funding has remained largely dormant. The opposite has occurred in the US: IPOs have fallen by half, and VC funding has surged. The authors examine the reason for this divergence between ASX IPO and US VC systems that, with their supporting ecosystems, have many features in common and function similarly. The authors explore the potential factors that could explain the US VC surge vis-à-vis Australia's VC stagnation.Design/methodology/approachThe authors’ analysis is predominantly qualitative. The authors describe the Australian listing process and its similar features and functions as for the prototypical VC. The authors also describe the developments in US VC driving its recent exceptional surge and highlight that such developments have not yet materialised on the Australian scene, where early-stage IPOs have served as a substitute.FindingsThe ASX's structure and ecosystem have been critical to its success in fostering early-stage main-board listings. While the US has succeeded in alternatively growing VC, there is an increasing concern that the latter has occurred partially because valuations are stretched, tax concessions for carried-interest capital gains are too high and corporate control benefits are becoming increasingly diluted. These developments could have important implications for Australia, where VC structures are currently being reviewed.Originality/valueTo the best of the authors’ knowledge, no prior study has attempted to bridge the broad differences in IPO and VC funding trends for early-stage companies in Australia and the USA.