A complex investment environment put the brakes on Australian IPO activity in the first half of the year.

But the companies that did make the ASX boards easily outperformed the broader index, according to a mid-year IPO Watch report from advisory firm HLB Mann Judd.

Just $823 million was raised in the six months to June — down 67 per cent from the prior year comparative period of $2.5 billion.

And that pool of capital was generated from just 23 listings, well below the five-year average of 36.

Small-cap IPOs — defined as companies with a market capitalisation of $100m or less at time of listing — was equally subdued, with 13 listings against a historical average volume of 31.

The slowdown in activity comes amid a broad improvement in both the ASX200 and Small Ords indexes, which have climbed steadily back towards 2007’s record high in the first half of the year.

But in discussing the results with Stockhead, HLB Mann Judd partner Marcus Ohm highlighted that timing plays a role in the IPO pipeline.

“It’s been a good start to the year, but if you go back six months before that (to 2H 2018), it was almost a mirror image going the wrong way,” he said.

“So in that environment there were a few IPOs that were deferred from the first half of this year.”

In line with that view, while first half activity was subdued, conditions were even slower in the March quarter, following the market ructions in December.

Where are the explorers?

Another point Ohm raised was the near-absence of activity in the materials sector.

Historically, IPO activity in Australia has largely been driven by materials via a steady influx of junior mining explorers.

Over the course of 2018 a total of 35 materials companies joined the ASX boards. In the first half of this year — and despite the record rally in gold prices — there were just three.

“I think with gold there’s been a few stories where companies have struggled,” Ohm said. He cited the examples of Gascoyne Resources (into administration) and Dacian Gold (production downgrades).

“Investors are just looking for a bit more certainty post-listing — which is difficult when you’re a junior explorer.”

Big gains

Another key theme was that while overall activity was lower, companies that did list smashed their performance metrics relative to the broader index.

Post-listing, the companies returned an average gain of 63 per cent.

“This represents a significant turnaround compared to previous year’s listings which lost an average of 18 per cent by year-end relative to their listing price,” Ohm said.

The outsized gains were helped by some big winners in fintech such as buy now, pay later competitor Splitit (ASX: SPT). Biotech bacteria-killer Next Science (ASX: NXS) was also a standout, closing on 30 June at $4 after listing in mid-April at $1.

Despite the market rebound in the first half of the year, Ohm said a complex outlook means the pipeline of listings still hasn’t gathered much momentum.

“I think part of that is a consensus view that the market’s been tracking well and so some companies are on high valuations, which is potentially indicative of a correction,” he said.

“At the same time, interest rates have re-set lower so that’s helping to keep people in the market.”

“It’s a tricky period for firm indications, because there are quite a lot of contradictory factors in the market place,” Ohm said.