The latest HLB Mann Judd’s IPO Watch Australia Mid-Year report has noted that there have been 12 new listings this year compared to 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 to 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”.
He also said the difficult market conditions are also reflected in the upcoming pipeline, with only one new listing noted at the end of June.
“There were multiple listings which were subsequently withdrawn during the period [amid] difficult market conditions,” Mr Ohm said.
“I think at one point we had about six or seven listings on there, sitting in… May/June time. And then suddenly it went down to one when we wrote the report, so I think there [are] a lot of ones who were pulled fairly late.
“This is not surprising as market uncertainty and share price volatility do not generally provide a listing-friendly environment given the significant costs involved in undertaking an IPO.”
There was one large-cap listing: healthcare equipment provider Atomo Diagnostics, which had a market capitalisation greater than $100 million. During the same period in 2019, there had been 10 new large-cap listings.
Atomo Diagnostics raised $30 million, the only contribution to a drastically lower large-cap funds raised during the half than normal. In 2019, there had been $600 million raised from large caps.
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, IPOs from the large-cap space… we’ve only seen Atomo Diagnostics and that was a smaller [large-cap] listing,” 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.
“I suspect there has to be some amelioration of uncertainty before listing can be a bit more favourable for those larger-cap stocks. As for when that will happen, who knows.”
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.
Healthcare equipment and services contributed most of the IPOs, whereas two materials listings were gold projects, against the backdrop of a high gold price.
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 said.
“The degree to which there is a recovery in the pipeline will be heavily influenced by broader macro concerns and ongoing risk associated with the pandemic. It will be interesting to see the extent of any recovery in the IPO market prior to 2021.”
