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IPOs halve but profits retain market beating
The number of Australian companies that have floated in the first half of 2020 halved year-on-year, as companies withdraw due to COVID-19 volatility, industry experts have explained.
IPOs halve but profits retain market beating
The number of Australian companies that have floated in the first half of 2020 halved year-on-year, as companies withdraw due to COVID-19 volatility, industry experts have explained.
The latest HLB Mann Judd’s IPO Watch Australia Mid-Year report has noted that there have been 12 new listings this year compared with 23 in the first six months of 2019 and the five-year average of 34.
During the June quarter, only three listings took place – with the majority of IPOs and fundraisings occurring in the first quarter. Around $87.5 million was raised in the first three months of the year, in contrast to $44.5 million in the second quarter.
The funds raised were soft compared with the previous year’s $823 million or 2018’s $2.5 billion, with HLB Mann Judd partner and report author Marcus Ohm noting he couldn’t “remember the last time the funds raised in the IPO market were so low”.
Despite only six sectors being represented, the overall return for IPOs remained high, beating the market by 28 per cent.
The IPO report revealed that technology and minerals were once again stronger performers, with software as a service (SaaS) company being the strongest performer for the period.
“It did have the best-performing company of the period that had a first day gain of 90 per cent, and by the end of the period, up 198 per cent.
“Unfortunately, that skewed our numbers a bit because it was one of 12 companies,” Mr Ohm explained.
While shares in the broader markets have begun recovering from COVID-19 lows, Mr Ohm noted that it is a difficult market conditions that are also reflected in the upcoming pipeline, with only one new listing at the end of June.
Highlighting the difficulties the market is facing, Mr Ohm noted there was only one large cap listing until 30 June, when during the same period last year there had been 10 large-cap.
The majority of listings (11) were from the small-cap sector (less than $100 million market capitalisation at listing), consistent with the year before.
“[Large-cap] listings in particular seem to be a bit of a barometer of the health of the market overall and certainly if you determine the health of the market based on the volume of funds raised,” Mr Ohm said.
“I think the problem with a [large-cap] listing right now, it’s very difficult in an environment where there’s a lot of risk around, there’s a lot of uncertainty around, to go through what is often a very expensive process and to get investors on board to support those for the volume of listings, I think that’s quite a challenging proposition at the moment.”
But the companies that did list were seen to achieve an average gain of 16 per cent, compared with the overall 12 per cent loss of the wider market.
One-third of the new listings recorded a gain of 35 per cent or more by the end of the period.
Mr Ohm added that amid the pandemic, the near-term horizon is difficult to predict.
“The markets have recovered somewhat but there’s no doubt there’s quite a lot of risk and volatility present. That’s generally not a good environment for IPOs,” he concluded.
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