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Small-cap IPO rise hits fundraising

The market has experienced a significant shift in the past two years towards more initial public offerings (IPO) comprised of small-cap companies, putting a dent on funds raised.

The HLB Mann Judd “IPO Watch Australia – Australian IPO Activity in 2017” report revealed 88 small-cap companies completed an IPO in 2017, making up 80 per cent of all listings.

This was a 38 per cent increase over 2016’s 64 small-cap listings and a 68 per cent rise on the average of 52 over the previous five years.

However, HLB Mann Judd Perth corporate and audit services partner Marcus Ohm said the increased number of small-cap companies listing relative to previous years led to lower associated capital raisings.

“The funds raised in 2017 were only $4.1 billion. It’s obviously a lot to you and me, but it’s not a lot for the IPO market,” Ohm told a recent media briefing in Sydney.

“That was down from $7.5 billion in the previous year. In fact, we’ve had some years in the last sort of five, six years that it has been as high as $16 billion. It really depends on the amount of large caps that we get in there.”

The report noted the most significant difference in 2017 was the absence of large companies listing with market capitalisations in excess of $1 billion: $2.4 billion was raised in 2016, while in 2015, $1.5 billion was raised by these companies.

Small caps raised a total of $1.1 billion in 2017 (or 28 per cent of the total funds raised of $4.1 billion).

The materials sector recorded the most listings for the year at 29, representing 26 per cent of all new IPOs.

Currently, 37 companies are awaiting approval to list, up 61 per cent over the beginning of 2017.

“Materials and technology stocks make up the bulk of the proposed listings, with nine and eight listings respectively,” Ohm said.

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