Releasing the IPO Watch Mid-Year Report for July 2019, HLB Mann Judd partner Marcus Ohm said that equity markets have contributed to a slowdown in the number of businesses undertaking initial public offerings (IPOs) so far this year.
The report showed 23 new listings to 30 June, well down on the 39 recorded in the same period of 2018.
It said the five-year average has been 36 listings for the first half of a calendar year.
Addressing a media briefing in Sydney, Mr Ohm attributed the slowdown to unfavourable equity market conditions and the ongoing US–China trade dispute, which is hitting the materials and resources sector particularly hard.
“The materials sector has had a fairly poor year [for listings],” he said.
“Materials had only three new listings for the period, compared to 16 for the same period last year.”
In the first half of 2018, 16 resources companies listed on the ASX, raising a combined $350 million. Over the same period this year, just three companies made their sharemarket debut, raising a collective $16 million.
Software and services — the other dominant force driving IPOs in Australia — saw four listings in 2019, down from six last year. However, those sharemarket floats raised considerably more money — $254 million compared with $113 million in 2018.
According to Mr Ohm, the pipeline of businesses seeking to list in September quarter is also subdued; however, he said the December quarter is likely to see a noticeable spike, as has been witnessed in recent years.
Other partners of the firm, Simon James and Nicholas Guest, suggested that many businesses are sourcing capital through alternative means, with Mr James stating “the appetite from PE [private equity] is very firm”.
Volumes down but results up
While the volume of new listings was down, those that did enjoyed significant gains on average, easily outpacing growth of the more established All Ordinaries Index.
The report noted that while the All Ordinaries was up by 19 per cent in the first six months of 2019, new IPOs posted an average first-day gain of 21 per cent and were up by an average of 63 per cent come 30 June.
That was a sharp contrast to the average loss of 18 per cent that last year’s IPOs recorded by the same period, against a 7 per cent drop in the All Ordinaries.
“This is a particularly good result and represents a return to the trend of IPOs tending to outperform the market, which has itself had a good six months,” Mr Ohm said.
“The majority of industry sectors performed well, with 10 sectors recording first-day gains, and 10 sectors also recording positive gains on average to 30 June 2019.”