PrimaryMarkets said to avoid overpaying for publicly listed companies investors should also consider private companies considering an IPO. Pic: Getty Images
Experts
PrimaryMarkets has observed a steady rise in private companies looking to bolster their balance sheet over the past six months via its capital raising platform.
PrimaryMarkets CEO Marcus Ritchie told Stockhead in anticipation of higher funding costs private companies are looking to capital raise, presenting potential opportunities for investors to take advantage as the economy continues to adjust to changing market conditions.
“Private market opportunities, where volatility is generally lower than public peers, coupled with the benefit that private companies don’t usually a carry the listing premium to that of public companies present as an interesting asset class,” he said.
“Traditionally these investments have largely been made available to private equity and institutions but now PrimaryMarkets is providing these investment and trading opportunities to sophisticated investors.”
PrimaryMarkets has more than 100 companies over 30 different sectors for investors to trade with live active trading of private companies along with capital raises for their next stage of growth.
Australia’s economy benefited from an exceptionally long period of growth which then saw significant disruption from the global COVID-19 crisis, and the subsequent economic impacts including to supply chains and rising interest rates.
Combined with the war in Eastern Europe, Australia has also battled an inflationary spike that has rattled global markets as well as those locally.
The RBA has now risen interest rates 10 times consecutively as it moves to get inflation back down to its target of 2-3%. ABS data shows that the monthly consumer price index rose 7.4% in the 12 months to January 2023, but is down from the 8.4% rise in December 2022.
This week the central bank raised the official cash rate by another 25 basis points to a near 11-year high of 3.60% and flagged at least another hike.
“Global uncertainty is a key risk but, on the current trajectory, Australia is expected to fare better than many other countries,” Ritchie said.
“Australia has handled these shocks pretty well, with strong household savings during Covid, a resources boom and the reopening of borders.”
Ritchie said with further interest rate rises expected over the coming months there is no doubt that the economy is under significant pressure to avoid a recession with pressure building on consumer spending and mortgage repayments.
“The general market sentiment is that we are yet to see the end of the current rate hikes, which will continue over this year, however the Australian economy is predicted to return to moderate growth, and asset prices may start to recover broadly by 2024,” he said.
“For investors, this presents an opportunity to source discounted assets as valuations are being reset.”
“Investors should remain vigilant and be prepared to take advantage of potential opportunities that arise as the economy continues to adjust to changing market conditions.”
Ritchie said the key leading sectors on the PrimaryMarkets Platform currently include renewable energy, hydrogen, medical/ healthcare and financial services.
Ritchie said given the uncertainty in public markets and tech stocks in particular, investors should consider diversifying their investments.
He said one question has been the generous valuation multiples afforded to technology companies.
“To avoid overpaying for publicly listed companies investors should also consider private companies that are considering an IPO at some time in the future,” he said.
“These private companies generally trade at a discount to similar sized public companies due to lower trading multiples and illiquidity discounts.
“Investors can find attractive private investments at a significant discount to public investments, that offer diversification and a measure of protection from overvalued public markets, with the additional benefit of significant upside that could materialise if these companies go public in future.”
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.
