The outlook for initial public offerings (IPO) in the first quarter of this year is strong after last year witnessed the highest number of new floats in a decade, according to an accounting and advisory firm.
The latest HLB Mann Judd “IPO Watch Australia Report” said there were 191 IPOs last year, compared to 74 in 2020 and 62 in 2019, and these raised $12.3 billion compared to $4.98 billion in 2020, which was impacted by COVID-19, and $6.91 billion in 2019.
HLB Mann Judd Perth partner and report author Marcus Ohm said the bulk of new companies coming to market was in the second half of the year, with 68 per cent of new listings occurring in the last two quarters of 2021.
“Activity was driven by the availability of capital underpinned by attractive investment fundamentals, sustained by strong levels of sentiment and a buoyant share market,” Ohm said.
He pointed out there was a significant increase in the number of small-cap listings, with 145 companies with a market cap of less than $100 million entering the market.
These listings represented 76 per cent of new market entrants for 2021, raising a total of $1.38 billion or 11 per cent of total funds raised during the year.
“The small-cap sector was dominated by the materials sector, which made up 68 per cent of listings in this bracket and was the strongest-performing industry sector overall, with 107 new entrants during 2021 compared to 24 in 2020,” Ohm explained.
He added 87 per cent of IPOs met or exceeded their capital-raising goals compared to the five-year average of 83 per cent and many companies recorded increases in stock prices following their listing.
“IPOs on average experienced strong share price performance subsequent to listing, recording an average first-day share price increase of 20 per cent. In total, 115 companies (60 per cent of all IPOs) ended their first day above their listing price,” he noted.
“This strong performance was maintained at the end of the year with an average increase in share price of 17 per cent across all IPOs.
“However, these averages hide a number of individual outliers, with 50 companies recording a year-end gain of 20 per cent or more and 57 companies recording a year-end loss of 20 per cent or more.”
According to Ohm the pipeline for further IPOs in 2022 remains strong and continued to be at rates above previous years.
“At the end of 2021, there were 27 companies which had applied for listing to the ASX (Australian Securities Exchange), a significant increase from the 14 companies at the same time the previous year. These companies are hoping to raise $250.4 million,” he observed.
“The materials sector looks set to continue dominating in early 2022, with 17 of these proposed listings and 45 per cent of funds sought coming from this sector, and over three-quarters of these relate to gold projects.”''