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IPO numbers take massive hit

IPO reduction

New analysis has shown a marked reduction in the number of initial public offerings (IPO) in 2020 as a result of the COVID-19 pandemic’s effect on markets.

The number of initial public offerings (IPO) on the Australian Securities Exchange (ASX) has fallen away dramatically in the wake of the coronavirus’s impact on markets, a mid-tier accounting firm’s analysis has shown.

The “HLB Mann Judd IPO Watch Australia Mid-Year Report” for 2020 revealed there were only 12 new ASX listings in the first six months of the year.

“From a historical context that’s a marked contrast to what we’ve seen in previous years. If we go back to the same period last year … we had 23 [listings] and if we go back over a longer time period, the five-year average is sitting around 34 listings,” HLB Mann Judd partner and report author Marcus Ohm said.

“So in 2020 so far, volume-wise, we’re roughly sitting at a third of the historical average that we’ve seen previously.”

Ohm noted the reduction in the overall number of IPOs so far this year has resulted in a commensurate fall in the capital raised by new company listings.

“So far in 2020 only $132 million has been raised [and] I really can’t remember the last time funds raised in the IPO market was so low,” he said.

“Just comparing that $132 million to what we’ve seen historically, this time last year the funds raised were $823 million and that was already in a fairly soft year in 2019. If we go back to the [year before that] it was $2.5 billion raised, so [it has been] very, very quiet so far this year.”

Of the 12 IPOs recorded in 2020 to date, only one was from a large-cap company, defined by a market capitalisation on listing of $100 million or more.

Six industry sectors accounted for the listings this year, with materials, and healthcare equipment and services being the most active in the space.

“[With regard to] materials listings, two of those were gold projects. That’s against the backdrop of a very high gold price at the moment, with the other being a copper project,” Ohm said.

“Share price-wise, materials floats held up quite well in terms of performance with an average gain of 2 per cent there by the end of the period.”

The report showed despite the slowdown in the market, 75 per cent of the new entrants onto the ASX this year were successful in meeting their targeted funds.

On a positive note, the report indicated companies that listed in 2020 performed well against their more established counterparts.

“Of those companies that successfully listed, overall share price performance was favourable. Newly listed companies achieved an average gain of 16 per cent compared with the overall 12 per cent loss recorded on the wider market,” Ohm said.

“Furthermore, one-third of new listings recorded a gain of 35 per cent or more by period end, meaning the IPO market did provide some opportunities for investors in a difficult market.”

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