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IPO market recovers after slow 2020

IPO market

After a poor 2020 due mainly to the effects of the COVID-19 pandemic, the Australian IPO market has rebounded strongly in the first half of the year.

The Australian initial public offering (IPO) market has continued to bounce back following a decline in early 2020 induced by the economic effects of the coronavirus, according to the latest industry analysis.

The “HLB Mann Judd IPO Watch Australia Mid-Year Report for 2021” showed 61 new companies listed on the Australian Securities Exchange (ASX) in the first half of the year compared to just 12 listings in the same period last year.

Funds raised also rose in line with the increase in the number of IPOs over the six months to June.

“Overall, $2.9 billion has been raised by new market entrants in the first six months of 2021, compared to only $132 million in the first half of 2020,” HLB Mann Judd Perth partner Marcus Ohm said.

“This increase in total funds raised was driven by the 13 large-cap IPOs (companies with a market cap of $1 million or more) coming to the market so far in 2021, compared to just one in the first half of 2020.”

Meanwhile, the small-cap portion of the market remained active with an additional 48 entrants in the first half of 2021, compared to only 43 in the whole of 2020, raising $462 million in capital.

The report showed the materials sector dominated public listings across the board, not only within the small-cap companies as has traditionally been the case, with gold and copper projects accounting for five of the 13 large-cap IPOs.

“In total, the materials sector accounted for 51 per cent of all IPOs so far this year and raised $648.8 million,” Ohm said.

In all, 17 sectors were involved with the listings for the first half of 2021 compared to six for the same period last year, with strong capital-raising contributions from the banking, and healthcare equipment and services industries.

According to Ohm, favourable macroeconomic and market conditions aided the success of the IPOs between January and June, as did positive investor sentiment.

Still, IPOs were unable to match the performance of the wider ASX. To this end, the average gain for all listings was 6 per cent as opposed to 11 per cent experienced by the All Ordinaries Index.

Further, Ohm forecast a bright outlook for the IPO market in the immediate term.

“Looking ahead, the pipeline at the end of June 2021 was healthy with 42 proposed listings seeking to raise a combined $1.25 billion. This compares to just a single proposed listing at the end of June 2020 and seven at the end of June 2019,” he observed.

“There continues to be a wide range of companies planning to list, with nine industry sectors represented. Exploration and mining companies are set to be the strongest contributors, with 27 listings looking to raise a total of $707.4 million.”

The report analysed IPO activity within the first six months of 2021, examining key metrics including listing volumes, share price performance, subscription rates and sector spread.

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