As expectation builds for IPO activity to revive in 2025, professionals maintain that Australia is an attractive listing destination that is “punching above its weight”.
Speaking at a media event in Sydney last week, ASX chief executive Helen Lofthouse voiced optimism for the year ahead, elaborating “there are a lot of conversations happening” despite an uncertain macroeconomic environment.
“The thing with IPOs is, it’s a question of confidence, and it’s a very cyclical market,” she said.
“If we look at what’s been happening over the last few years, you’ve had real questions over macroeconomics – what’s happening with inflation and with interest rates – and of course, for a company founder, this is one of the biggest decisions they’ll make, where they’ll go, so changing inflation, changing inflation rates, has created that uncertainty.”
Despite this, market valuations have remained resilient, Lofthouse observed.
“A lot of those founders are probably looking back and going, ‘Maybe we should’ve actually gotten on with it’,” she said.
The window is “absolutely open” for the right companies seeking to list on the exchange, the ASX CEO reiterated, adding the timing to list will only grow more attractive as markets get more comfortable with the outlook for inflation in the year ahead and interest rates stabilise.
According to Barrenjoey Capital Partners’ co-executive chairman, Guy Fowler, the firm has already witnessed more conversations about IPOs in the last two months than it has in the previous three years, indicating “sparked interest” in Australia’s listed markets.
While the market is “not red hot” yet, there is reason for optimism, he said.
“Maybe not the end of 2024, but 2025 looks a lot better than 2023,” Fowler said.
Previous ASX analysis suggests there has been a net new capital of $7 billion added to the exchange thus far in the five months to the end of May.
In a piece penned on the ASX last month, ASX listings manager Kate Galpin observed the pipeline of new listings “looks promising” heading into the second half of the year, including companies in the industrials, mining, and consumer discretionary sectors.
She, too, pointed to the cyclical nature of IPOs resulting in a reasonably slow period and observed macroeconomic headwinds have “played a role in reducing the number of new listings globally last year and the ASX was no exception”.
Room for reform
Reflecting on Australia’s exchange as a listing destination, ASX CEO Lofthouse said she is “definitely comfortable” with its level of attractiveness for domestic and overseas companies.
According to the latest ASX Group Monthly Activity Report, there were around 2,155 entities listed on the exchange in the last year, down slightly from 2,255 in the prior corresponding period.
However, Lofthouse reiterated the ASX “punches well above its weight as a listings destination”.
“We compete on a global stage and do so very effectively, consistently in the top 10 list of places for listing. It’s a very attractive market,” she said.
“We’ve got substantial capital in Australia looking for investment opportunities. We see companies getting earlier index inclusion here, which is really attractive, [and] we see valuations being attractive for companies.”
Barrenjoey’s Fowler, too, outlined Australia is a “very good” market for access for capital, pointing to the fact that Australian companies are priced at premiums to their global peers in a number of sectors and its banks remain the most expensive banks in the world.
But, he argued, there remain differentiating factors compared with global exchanges that could be improved, namely adapting the need for prospectus forecasts and shortening the time frame of a listing.
“In the US, you don’t need to do forecasts. For a high growth company, that can be appealing,” Fowler said.
“It’s hard to put a marker in the sand and say, ‘This is definitely where it’s going to be next year’. I get why we have that, but it’s worth a debate.”
Additionally, he explained the timeline between seeking IPO and commencing trading on the ASX is longer than other markets, which can be a particularly “nerve-wracking” time for entrepreneurs.
“In a volatile market, you want that to be as short as possible. I’m sure we’ll get to it, but are there things we can do to shorten that time frame?” Fowler said.
“You can do an IPO in the [US] – from the time that you’ve become public to when you’re trading – in two weeks and it’s longer here. We should examine that.”
