Australia is flying high when it comes to floats – especially small caps
US Olympian Greg Louganis floats in the air at the LA Olympics in 1984. Pic: Getty
The number of IPOs around the world dipped in the March quarter but Australia continued to punch above its weight, according to consultancy EY’s quarterly review.
“Risks and uncertainties returned to the IPO market in Q2 2018 as geopolitical tensions and changes in trade policies caused higher market volatility and softened IPO confidence in many parts of the world,” said EY Global’s head of IPOs, Dr Martin Steinbach, in the consultancy’s latest IPO report.
Globally there were 660 IPOs in the period — down 21 per cent year-on-year. Total proceeds were up 5 per cent at $US94.3 billion, however.
In Australia, the ASX launched 5 per cent fewer IPOs for the quarter compared to the same period a year ago — but “proceeds are continuing to rise (up 117 per cent) as the size of the companies coming to the public market keeps growing”, EY said.
Australia was the fourth busiest stockmarket for IPOs in the first half, behind Hong Kong (97), India (94) and the US NASDAQ (66)
The ASX launched 47 new listings in the half-year, ASX head of listings Eddie Grieve told Stockhead.
That outstripped Tokyo (38), Shanghai (37), New York’s NYSE (35) and London (22).
“There were 47 new listings in Q1 and Q2 of calendar year 2018 compared to 60 in the previous corresponding period (Q1 and Q2 of 2017), with the total deal value remaining stable and some large market cap companies, including Unibail-Rodamco-Westfield, Jupiter Mines and Evans Dixon brought to the market,” Mr Grieve said.
EY calculated ASX floats raised about $US1.6 billion in the period — which didn’t place Australia in the global top ten. (US IPOs raised about $US30 billion by comparison, EY said).
Dinner is served
A resurgence in IPO activity is expected in the second half due to encouraging economic conditions, high equity valuations in many parts of the world and low interest rates, EY reports.
The ASX has 36 floats registered to list this quarter.
(Two major ASX floats hit the ASX on Monday. Dinner delivery service Marley Spoon slipped on debut after raising $70 million, but US computer chip maker Pivotal Systems finished day one up 40 per cent after pocketing $53 million.)
Some upcoming floats will inevitably be withdrawn while new players will come out of the woodwork.
But overall the outlook for Aussie IPOs is very positive, Mr Grieve says.
“The listings pipeline remains healthy, particularly in the small and mid-cap space.
“Subject of course to market conditions, we expect to see further floats from the mining sector and the return of some high profile large cap floats in the 2nd half of 2018.”
EY predicts “Australia’s economic strength, political stability and low interest rates will provide stable IPO activity in the second half of 2018”.
However oveall IPO volumes this year would “likely track lower than 2017 levels, despite a number of candidates in the pipeline looking to list in the second half of 2018”, EY said
“Given the current uncertainties in the IPO market, issuers are always wise to consider a multitrack approach, where organisations prepare for their IPO so that they are ready to go when the window opens, but remain open to alternate funding options and be flexible in terms of timing and pricing,” EY said.
“The merger and acquisition (M&A) market is one such alternative. Year-to-date 2018 M&A activity level shows that 2018 has the potential to be one of the most active years for M&A.”
Here are the major factors expected to affect the global IPO market in the December half: