The initial public offering (IPO) market has gone from bad to worse. Sixty-nine IPOs raised $7.5 billion in the first half of this financial year. So far, 53 IPOs have raised just over $500 million in the second half. A weak share market and absence of larger floats have stopped the IPO market in its tracks.
IPO activity in the first half of 2010/11 was dominated by the $4-billion QR National and $2-billion Westfield Retail Trust capital raisings. And 33 companies listed in December - usually a busy time for floats as companies race to list before year's end.
Such momentum built expectations of a buoyant IPO market in 2011, but it has disappointed at every turn.
The multi-billion-dollar float of Nine Entertainment Co, potentially the biggest IPO in years, was shelved due to weak advertising markets and a falling share market. Mooted listings for Hoyts and retailer Bras N Things were canned.
Vendors are in no mood to sell assets in a troubled market, and trade sales to other companies or private equity firms have become a stronger option.
The IPO market suffered another blow this week when Quick Service Restaurant Holdings, which owns the Red Rooster, Oporto and Chicken Treat fast-food chains, was sold from one private equity firm to another for $450 million.
There was talk Quick Service may have floated in the fourth quarter of 2011 - its prominent brands made it an ideal candidate. But share market weakness spooked its owners.
Even smaller companies are finding it hard to float.
The Australian Securities Exchange website shows 30 upcoming floats - a reasonable volume for this time of the year.
Nearly all IPOs are for tiny explorers, and many have had to extend their offer periods to raise minimum subscriptions. Agricultural technology company Anagen withdrew its offer after failing to raise enough capital.
There has been some good news. Shipping container group Royal Wolf Holdings raised $91.5 million in May, making it the year's largest IPO.
Its $1.83 shares have rallied to $2.12, despite broader share market falls. Newspaper reports suggest the Witchery and Mimco fashion house, mining services group Barminco, and temporary accommodation builder Ausco Modular could float this year.
More likely is that bigger floats are being delayed until late this year or next year.
Larger IPOs take between three and six months to conceive, launch and close, so companies thinking about floating in November or December need to make a decision on their IPO now. If the market keeps falling, vendors will be nervous about selling assets via IPO, and demand for stock could be muted.
The irony is floats that got away in 2010/11 on average performed fairly well given market conditions.
Analysis of 122 IPOs shows a median first-day, or 'stag', gain of 10 per cent.
Nine IPOs have more than doubled their issue price and another 53 are trading in line with or above their issue price. Sixty IPOs have fallen below their issue price since listing - a figure that will rise if the market keeps tumbling.
