Each week, corporate advisory firm Barclay Pearce highlights the key trading themes of the week, along with which companies and sectors Stockhead readers should be keeping their eye on.

Post-COVID bull markets have been defined in part by a flood of IPO activity, as companies look to take advantage of plentiful liquidity to take a run at the ASX boards.

At the halfway point of September, more than 100 companies have listed successfully so far this year, with a strong pipeline still scheduled through the middle of October.

And Trent Primmer, Head of Trading at corporate advisory firm Barclay Pearce, said it reflects something of a trend to ‘make hay while the sun shines’.

Speaking with Stockhead this week, Primmer noted that risk-on capital flows are still seeking strong pre-IPO returns.

But “if you look at the momentum we’ve had this year, I think that’s turning into a sense of urgency among advisory firms to tie off the current deals they have before the end of the year,” he said.

And that’s partly because heading into the first half of 2022, it’s “no one really knows what the market’s going to do”, Primmer said.

In that context, “we’re trying to avoid being too heavily involved in the pre-IPO space”, heading into the end of 2021, he added.

However, Primmer did highlight two pre-IPO companies BP is working with, which are unique in terms of where they are looking to list.
 

Looking abroad

One company in BP’s advisory sphere is Verdant Earth Technologies, a clean energy play that’s developing the Verdant Energy Hub in the NSW Hunter Valley.

The hub is a former coal power station that Verdant is converting into a 151MW biomass plant. And to fund it, the company is turning to US investors on the Nasdaq, where it’s scheduled to list “within the next couple of months”, Primmer said.

Barclay Pearce is also advising Koch Metals, which is developing the Constance Range iron ore project about 280km from the Port of Karumba in North Queensland.

While ASX investors are familiar with iron ore, Koch is looking to the UK as it eyes plans for a listing on the London Stock Exchange (LSE).

Why look abroad? For Primmer, both Verdant and Koch operate business models that are subject to something of a ‘gap’ in Australia’s IPO market.

“The idea from a corp advisor standpoint if you’re working companies that are going to be bigger at the time of listing — what are the chances you’re going to get a $200m clean energy IPO away in the Australian market?” he said.

“For one thing, you’re targeting a much smaller pool of investors in this market looking to fund larger-scale renewable energy projects.

“In that context, you’ve got a far better chance to tap US markets and secure not just investor funding but also government funding, and also have the company perform quite well at IPO.”

Primmer said it’s a similar situation for Koch Metal, where there’s “no happy medium” on the ASX for companies of Koch’s size.

“In Australia you’ve obviously got plenty of pre-IPO appetite for companies at the junior exploration or ‘speccy miner’ phase,” he said.

“They often get a bit of ‘IPO-love’, then they’re going to be reliant on good drilling results to keep the momentum going.”

On the opposite end of the spectrum you’ve got the traditional mining heavyweights, but not as much appetite for mid-size players.

Koch’s Constance Range project holds 242Mt iron ore identified as an exploration target, including 11.58Mt at grades of 57% Fe.

As it moves towards production, the company has entered into a (non-legally binding) Memorandum of Understanding (MoU) with a Vietnamese off-take partner for 1.5 million tonnes per annum.

In a recent investor presentation, the company flagged its preference for the LSE due to “greater access to capital, trade depth and recognition among London equity market investors”.

“From our perspective, we’ve got a lot of networks in UK capital markets that see value in an Australian iron ore development company of this size,” Primmer said.

“The sense on the ground is to list now. It’s the right time because markets are high, and there’s a lot of money in overseas equity markets. A lot of people want to get business done before end of year, so it’s a matter of taking the ball and running with it.”

“I think that’s notably different from even three months ago, when people felt they had plenty of time to dot the I’s and cross the T’s with the relevant exchanges and get companies up and running,” Primmer said.

“But now the feeling is to do it quick smart and get the listing away on this side of the calendar year.”

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.