Higher interest rates and persistent inflation have weighed heavily on the market for initial public offerings (IPOs) so far in 2024, following a disappointing 2023 where funds raised from ASX listings fell below $1 billion for the first time since 2012, according to HLB Mann Judd’s latest report.
There have been just 13 listings in the first six months to June 2024, one fewer than in the same period last year.
But despite fewer IPO listings, Marcus Ohm of HLB Mann Judd Perth highlighted that capital raised was nearly equal to the entire previous year due to two major listings.
Namely, materials company Metals Acquisition Limited (ASX: MAC) was the first big listing of the year in February, raising a total of $325 million, followed by the June listing of Mexican-themed restaurant chain Guzman y Gomez Limited (ASX: GYG), when $335 million was raised.
“Total funds raised in the first six months of 2024 were $809.5 million, an increase of 440 per cent compared to the same period last year ($149.9 million). While there were only three large-cap listings during the first half of 2024, this included two companies with a market capitalisation exceeding $1 billion at listing, which contributed $660.1 million in total funds raised,” Ohm said.
Despite ongoing uncertainty about the IPO market’s recovery, Ohm noted investor appetite remains strong for well-positioned listings, as evidenced by the oversubscription and strong initial performance of Metals Acquisition and Guzman y Gomez IPOs.
“The average first day gain across all new listings was 32 per cent for the first six months of 2024, compared to the average first day gain of just 6 per cent for the full 12 months of 2023. By the end of June 2024, the average increase over the listing price was 13 per cent, compared to an average year-end loss in 2023 of 10 per cent,” Ohm said.
“New IPOs performed well relative to the wider share market, with the ASX All Ordinaries closing just above 8,013 at the end of the period, representing a 2 per cent increase for the period. IPOs performed much better, indicating a positive investor appetite for new listings.”
He, however, cautioned that the extent of any wider recovery in the Australian IPO market remains to be seen.
“There are not yet any significant volumes in the near-term pipeline, with only four upcoming listings registered with the ASX (at the time of writing), three of which are materials companies,” Ohm said.
As of 30 June 2024, four upcoming ASX listings aim to raise $111 million in initial capital, excluding Alcoa Corporation, which is listing CHESS Depositary Interests (CDIs) without raising additional funds.
Ohm also revealed that most of the 13 listings to date were small caps, raising $90.5 million across 10 listings and contributing just 11 per cent of total funds raised, a significant drop from the 67 per cent contribution by small caps in the same period of 2023.
Earlier this month, the ASX manager for listing assured that after a quieter period, optimism abounds as the cyclical nature of IPO activity gears up for a resurgence in the second half of this year, with momentum carrying into 2025.
In a piece published on the ASX, Kate Galpin said: “After an extremely busy 2021 it has been relatively quiet over the past couple of years, similar to 2011–12, but the IPO market is cyclical, and activity will return.”
“Headwinds caused by uncertainty around inflation and increasing interest rates played a role in reducing the number of new listings globally last year, and ASX was no exception with some highly anticipated IPOs deferred,” Galpin said.
The ASX contracted by $55 billion last year due to shifting market dynamics, including declining IPO activity and a growing preference for private markets.
