The ASX IPO market shoud look better in the 2nd half, says James Posnett, ASX GM of Listing. Picture Getty
IPO Watch
The global IPO market has been very much subdued this year, following a dry 2022 and a hangover from 2021’s frenzy.
In the US, direct listings and IPOs with an initial valuation of at least $50 million numbered just 71 last year, down from nearly 400 in 2021, according to official data.
The biggest IPO in 2023 so far has been that of Johnson & Johnson’s spun-off consumer brands division, Kenvue, which made its debut on the NYSE bourse last week at a market cap of around US$40 billion.
In Australia, there’s been only 10 new listings in 2023 amid a glut of macro issues.
James Posnett, the ASX General Manager of Listings, said that he wasn’t surprised by the sluggish market this year, but expected a much better second half.
“There’s obviously been a lot of macro issues that created some headwinds,” Posnett explained.
“There was also a lot of government stimulus in 2021 for Covid that has since been wound back, so that combination of factors has not been great for IPOs.
“But certainly, things will look better for the IPO market in the second half from our read at the moment,” said Posnett.
Posnett says the IPO pipeline for the second half of this calendar year should be much busier.
“The activity of the capital markets ecosystem is working on various things at the moment, and we also have companies looking to come to market,” Posnett told Stockhead.
“So we expect Q3 and Q4 to be busier and much better in terms of activity.”
Posnett says the the junior mining companies have continued to raise money, and will continue to be able to do so.
Sectors like battery metals, nickel, lithium, copper, cobalt and those themes are going to be dominant for the foreseeable future.
“The clean tech theme will continue for several years to come,” said Posnett.
As for the technology and the biotech sectors, Posnett believes there is some pent up demand from investors right now for those companies.
For that to happen, Posnett says we need to first see more of the larger, lower risk IPO come to market to shore up investors’ confidence.
“You might have read that Virgin Airlines is potentially listing in the second half of this calendar year. These kinds of companies are typically needed before we can see more traditional sectors follow suit.”
Posnett says the equity market as a whole is still quite healthy, in the sense that we’re getting lots of secondary capital raising.
As of the end of April, the secondary capital raising market in Australia was sitting at $12 billion.
“That’s a really good indicator that if you’re already listed, it’s still a good market and you’re still able to raise capital,” says Posnett.
The other critical factor to point out, according to Posnett, is the VIX index, which measures the stock market’s state of expected volatility.
The S&P ASX 200 VIX index is currently trading at 12.36, and has fallen by over 35% over the past 12 months.
“When the stock market is highly volatile, it’s more difficult to bring a company to market because there’s a lot of hesitancy, and we saw that in 2022,” said Posnett.
Posnett believes that for IPOs to happen, the VIX index needs to be at a reasonable level for a period of time.
“Typically, at or below 15 is a good place where IPOs can get done,” he said.
“So 2023 looks a lot better than 2022. And using the VIX as a leading indicator, the IPO market should look a lot better at the end of Q2, and in Q3 and Q4.”
Here are the 10 ASX IPO listings this year, and their returns so far.
| Code | Name | IPO Price | Current Price | Return | Day 1 return | Market cap | Listing date |
|---|---|---|---|---|---|---|---|
| EG1 | Evergreen Lithium | $0.25 | $0.43 | 70.00% | 20.00% | $23.9m | 11/04/2023 |
| PL3 | Patagonia Lithium | $0.20 | $0.18 | -12.50% | 10.00% | $8.58m | 31/03/2023 |
| LM1 | Leeuwin Metals | $0.25 | $0.32 | 26.00% | -4.00% | $12.69m | 29/03/2023 |
| SQX | SQX Resources | $0.20 | $0.14 | -32.50% | -15.00% | $3.38m | 20/02/2023 |
| HTM | High-Tech Metals | $0.20 | $0.23 | 15.00% | 2.50% | $5.67m | 23/01/2023 |
| ADC | Acdc Metals | $0.20 | $0.09 | -54.00% | 0.00% | $4.3m | 17/01/2023 |
| DYM | Dynamic Metals | $0.20 | $0.17 | -17.50% | -5.00% | $5.78m | 16/01/2023 |
| GHY | Gold Hydrogen | $0.50 | $0.38 | -25.00% | 2.00% | $19.13m | 13/01/2023 |
| ACE | Acusensus | $4.00 | $3.44 | -14.00% | 0.00% | $86.74m | 12/01/2023 |
| VHM | VHM | $1.35 | $0.88 | -34.80% | -15.60% | $131.01m | 09/01/2023 |
All dates are from the ASX website, and are subject to change without notice.
WESTERN AUSTRALIA ENERGY RESOURCES (ASX:WER)
Listing: 10 May
IPO: $5m at $0.20
WER is exploring and developing its its Jimberlana Project on the Yilgarn Craton for battery metals.
The company owns two granted exploration licences covering 253km2 and a further seven exploration licence applications covering an additional 687km2.
The focus is on the 75km of strike of the lightly explored Jimberlana Dyke which hosts a nickel laterite deposit at Bronzite Ridge and historical drill-holes reporting nickel sulphide mineralisation.
The plan is to drill the Bronzite Ridge nickel laterite deposit with a view to increasing the resource confidence and obtaining samples for metallurgical test-work.
DRAGONFLY BIOSCIENCES (ASX:DRF)
Listing: 15 May
IPO: $5m at $0.20
Dragonfly Biosciences is the proprietor of the “Dragonfly CBD” brand and is a premium retailer of cannabidiol in the UK, supplying CBD products to national retail chains and international markets.
The company aims to expand its business and product range in line with legislative changes in Europe, the US and Australia.
Dragonfly recently received the “Highly Commended” MVP Award by one of the world’s most respected health and beauty retailer and pharmacy chains in 2022.
TIGER TASMAN MINERALS (ASX:T1G)
Listing: 15 May
IPO: $8m at $0.20
Tiger Tasman Minerals has projects in WA and QLD focused on copper, lithium, nickel, manganese, silver, gold, base metals and industrial minerals (DMM) essential to the global clean energy transition, decarbonisation and a more sustainable future.
The projects are in proven and prospective jurisdictions including Paterson Province, Fraser Range, Earaheedy Basin, Ashburton and the Townsville region.
They are the Iron Skarn silver-copper-lead-zinc project (QLD), the Copper Canyon copper-gold project (WA), the Fraser Range lithium-nickel-copper project (WA), the Mt Minnie manganese project (WA), and the Crater copper-zinc-lead-silver-gold project (WA).
The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.
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