Can the stock market success of Montreal's IPOs be predicted by the prospectus' content?

In this paper, we investigated if it is possible for investors to objectively estimate the probability of success of newly public companies using the information contained in offering prospectuses. Analysing prospectuses of small firms that went public on the Montreal Stock Exchange revealed that the age of the firm at the time of the IPO, the percentage of voting rights sold by managers, the sales growth potential and the subscription price of newly quoted firms could be good predictors of long-term performance on the stock market. However, it is relatively difficult to link any information contained in the issuing prospectus to short-term performance. The findings of this study should help authorities to define more stringent criteria to accept new public offerings and make the small cap market more attractive to investors and new growing companies.