Abstract
Small and Medium Enterprises (SMEs) often lack the capital required to grow from
medium-sized firms to large entities. The Johannesburg Stock Exchange is offering
capital on the Alternative Exchange (AltX) platform that has been created specifically
for SMEs. It has lower listing requirements and costs than the Mainboard.
Furthermore, AltX has been noted as the platform with the highest migration rate to
the Mainboard, implying that SMEs can grow from Adolescent growth stage to Maturity
growth stage and therefore transform from Medium to Large entities. However, there
are only 42 SMEs (too small a number) listed on AltX out of a possible 86 000 formal
SMEs in South Africa. This may be indicative of challenges in accessing Public Equity
on AltX.
This study assesses the financing of Small and Medium Enterprises (SMEs) growth
through Public Equity. This was done by determining the relationship between Public
Equity financing (listing on JSE Alternative Exchange, AltX) and the growth of SMEs.
The Pecking Order Theory of Capital Structure was adopted to frame and understand
the factors that influence the financial decisions of SME owners, with regards to the
use of Public Equity. Furthermore, a firm at Adolescent growth stage is expected to
transform from a Medium-sized firm to a Large enterprise through Public Equity
financing. Therefore, the study further identifies the challenges on the supply and
demand side of Public Equity financing and examines the impact this has on the SME’s
decision to list. In this regard, the Theory of Planned Behaviour was used to frame and
understand the demand side of Public Equity, in other words, the non-economic
financial decisions of SME owners.
The study adopted the Interpretivist paradigm, making this a Qualitative Study. A
Grounded Theory Research design was used to determine how firms experience the
process of listing, if listing provided the growth required for the listed firms and if there
are challenges that inhibit unlisted firms from listing. A sample of 20 firms was obtained
(six AltX-listed firms and fourteen unlisted SMEs). The data was analysed qualitatively
through Constant Comparative Analysis and complemented with an empirical analysis...