The number and value of companies listing on the ASX continued to grow in the past year following the impacts of the COVID-19 pandemic that weighed down activity in early 2020.
“We’re tracking towards around 250 total listings for the calendar year and that would rank as the third best year on record and the best year since calendar 2007,” said ASX group executive of listings Max Cunningham.
Capital raised in 2021 exceeded $12 billion to reach the highest level since 2014.
HLB Mann Judd partner Marcus Ohm said the strong year for IPOs had far exceeded what had been seen in recent years, including the 74 listings in 2020 that raised just under $5 billion.
“Listings this year have been dominated by the materials sector which contributed almost 60 percent of listings to the end of November,” he said.
“This has been driven by a positive outlook for the resources industry currently as the recovery continues from COVID combined with strong investor sentiment towards resources IPOs.”
Outside of materials, a number of other sectors had also seen strong IPO activity.
“Other sectors which have performed well include biotechs, software and services, retailing and diversified financials and there has been broad-based investor support across multiple industry sectors contributing to the strong volumes overall,” said Mr Ohm.
“We’ve had a good broad level of REITs, industrials, consumers, tech, private equity-lead deals, founder-lead transactions, a whole range of industries and financial backers that have really brought these companies to market,” added Mr Cunningham.
Multiple economic factors have influenced the growing number and value of IPOs in 2021.
“The macro, of course, is monetary policy and stimulus and low interest rates, both in terms of cash being pumped into the economy by central banks but also investors that are earning low interest looking to work their capital harder and recycle that capital more frequently,” said Mr Cunningham.
“Microeconomic, you’ve seen a very, very strong reporting season for listed companies, so it’s not unreasonable to expect that a lot of private companies are doing better as well and having strong years so that might enable them to bring forward some of their go-public plans.”
Another significant trend identified by Mr Ohm was the multiple spin-offs of existing resources projects into new listed entities that had taken place in 2021.
“This has allowed more funding to be available across more projects, as well as greater management focus over specific projects driving greater future exploration activity across Australia,” he said.
The ASX reached a major milestone with a record-breaking eight IPOs valued at $1 billion or more including PEXA, Pepper Money and Judo.
“In a normal year, we probably have two or three and in a very good year, we’ve had four or five,” said Mr Cunningham.
GQG takes the top spot
The biggest listing of the year, global equities manager GQG Partners, raised $1.19 billion at $2 per share in October giving it a market cap of $5.91 billion.
The firm was founded in 2016 by current chairman and CIO Rajiv Jain and CEO Tim Carver, who retained a 68.8 per cent and 5.6 per cent stake after listing, respectively.
GQG Partners managing director of Australia and New Zealand Laird Abernethy told InvestorDaily that the company was surprised to have become the biggest IPO of 2021.
“It certainly wasn’t something that we were aiming for, to be the biggest,” he said.
A key reason behind the listing was to ensure that GQG Partners can retain and attract staff in “one of the most competitive industries in the world”, according to Mr Abernethy.
“Where else can you get the average for free of any product in any industry in the world? If you want the average in the asset management industry, you buy a passive fund, and institutions are getting those almost for free,” he said.
“It’s a very competitive industry, particularly active asset management, and we think that was our primary motivation, not to become the biggest IPO of 2021 or one of the biggest, but to gain this competitive tool of scrip to retain and attract the best talent in the industry.”
Mr Abernethy said the decision to list on the ASX was driven by the company’s strong affinity with Australia.
“Australia has been a strategic market for the firm since its inception, and this is largely because of the very sophisticated investor base and client base that Australia has,” said Mr Abernethy.
GQG said it was pleased with the response it had received from investors.
“I think the prevalence of superannuation schemes using active managers as asset managers creates an appreciation of boutique managers like ourselves by both institutional and retail investors,” said Mr Abernethy.
“We think that’s really valuable as it means the shareholder base has an understanding of the importance of us maintaining a very strong investment culture over any shorter-term financial pressures.”
Moving forward, the firm will remain focused on organic growth and potential geographic expansion within Australia as well as the Middle East and Canada.
“The brand hit, if you like, we get from this IPO is going to be incredibly important for the leverage of executing on our organic growth strategies in the Australian market,” said Mr Abernethy.
Looking forward to 2022
While still early days, strong IPO activity is expected to continue in the first quarter of 2022.
More than 50 potential IPOs had a proposed listing date between late December 2021 to early January 2022, according to Mr Ohm.
“Given the strong activity levels, the process of completing listings is currently taking time as well which will potentially impact upon listing dates,” said Mr Ohm.
Mr Cunningham described the outlook for listings in 2022 as “healthy” but said that it was difficult to forecast more than three months out.
“I think it looks promising, but there’s a range of factors that could come to weigh on that,” he said.
“As far as the next three months goes, a lot of those institutional deals will probably take a little bit of a breather, but the smaller and mid-cap mining and some of the smaller sectors are probably going to continue very strongly into January.”
Mr Ohm also noted some uncertainties remained about the outlook for the rest of 2022.
“It will likely depend upon the continuation of a supportive environment for IPOs and there will inevitably be a decline at some point given the strength of activity in 2021,” he said.
“The extent to which economic recovery continues, market sentiment and the evolution of COVID-related uncertainty will all have an impact,” said Mr Ohm.
