A weak share market has not stopped 32 companies launching initial public offerings (IPO) in what is the busiest second quarter for IPOs since 2007.
Their timing is poor. Falling global share markets, retreating commodity prices and waning investor sentiment are lousy conditions for speculative companies to float. But only a handful of IPOs have extended their offers or withdrawn them, suggesting interest in resource IPOs remains strong.
That will change quickly if the share market sell-off continues. Higher volatility is the enemy of the IPO market. The second quarter is usually busy for IPOs as companies wait until the half-year profit reporting period in February before launching their offers. Many floats, which typically take three to six months, would have been planned earlier this year when listing conditions were better.
Most IPOs are for small explorers. The exception is the recently announced $91.5-million offer for logistics group Royal Wolf Holdings, which is this year's largest float so far. Credit Suisse is underwriting the offer for the container provider.
The next largest IPO is for real estate data provider Onthehouse Holdings, which is seeking $55 million. Queensland floats have been popular with investors in the past 18 months, with shares in Corporate Travel Management, data-centre technology company NextDC, and energy storage company Redflow performing well after listing.
Another non-mining IPO is for RXP Services, an information and communications technology consultancy trying to raise $12 million. Technology IPOs have been rare in the past three years, with speculators preferring to invest in mining stocks over information technology, biotech or clean-technology companies. RXP has been busy growing through acquisitions since 2010.
Among the larger exploration IPOs is an $18.2-million offer for Kimberley Rare Earths that closed heavily oversubscribed, amid booming interest in rare earth explorers. A spin-off from gold explorer Navigator Resources, Kimberley was due to list at the time of Investor Weekly's publication.
Other notable exploration IPOs include a $5.4-million offer for Melrose Gold Mines, which was divested from Korab Resources. Melrose is developing gold projects in Western Australia and the Northern Territory, and wants to fast-track a feasibility study for its lead project. A South Australian IPO, Peninsula Resources, is raising $7 million to explore for copper, gold and uranium.
These and other companies hope current market volatility does not scare investors. IPO volumes have improved markedly in recent years, with more than 100 IPOs already this financial year returning an average 31 per cent gain over their issue price since listing. But IPO values have been much lower than expected because of an absence of household-name floats raising large amount of capital.
