'LITTLE FISH' KEEP IPO MARKET ALIVE IN 2015
Written on the 4 September 2015 by Nick Nichols
THE Australian IPO market remained buoyant in the first half of 2015, but the $2.5 billion combined value of new share floats was almost half the level of a year ago.
The latest Deloitte IPO Market Update has revealed the ASX welcomed 30 new IPOs in the six months to the end of June, up from 22 during the same period in 2014.
However, last year the combined value of those share floats surged to a record $4.6 billion.
Despite the value difference, Deloitte says the IPO market remains buoyant in Australia, with technology, media, and telecommunications listings accounting for almost half of the strong numbers in the first half of this year.
"The IPO wave of 2014, fuelled largely by pent-up supply as companies and private equity owners capitalised on improving market conditions and a window of opportunity following three years of sluggish activity, has yet to break," says Ian Turner, Deloitte Corporate Finance partner and head of transaction services.
"A strong pipeline still exists as managers and financial sponsors prepare their companies for the public markets."
Turner says 2014 listings have 'significantly' outperformed the ASX.
"And despite global volatility, we are seeing strong investor confidence given the quality of IPOs," he says.
"You only have to look at the listings for the first half of 2015 and their impressive performance.
"On average, shares of companies that listed in 2014 outperformed the market. But as the supply of sizable listings becomes constrained, investors become more selective, and sceptical, of IPOs.
"Issuers will need to find ways of raising their attractiveness among competing listings.
"Raising their attractiveness, and value, is one component to encouraging investors. So companies that want to be truly effective will have to make the proposition simple via a well-articulated story for their business.
"Stocks that struggled to go public this year were typically not well understood by the market."
Deloitte Transaction Services director Tapan Verma highlights Eclipx and Pepper Group among the major IPO successes. He says both have 'impressive management teams, clearly defined strategies and growth plans'.
"Investors also took to the confidence displayed in the listings by the private equity and founding owners who retained significant stakes in the businesses, and the long-term incentive schemes put in place," Verma says.
As for the rest of the year, Turner the confidence shakeout arising from the Eurozone crisis and the gyrations of the Shanghai Stock Exchange is abating.
"Although, market volatility and global events will without doubt continue to play a role in the strength of Australia's IPO pipeline here," he says.
"It's encouraging to see that ASX listings in the last two years have held their own, which reflects the quality that investors have come to expect.
"And there's a lot of positive news coming out of this reporting season with the vast majority of 2014 listings exceeding their prospectus forecasts."
Author: Nick Nichols