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IPO market offers slim pickings

IPO market listings

IPOs are currently providing investors with a limited number of opportunities across fewer sectors to participate in capital raisings.

Investors looking to access new investments via initial public offerings (IPO) will find limited market listings in the coming months, but should consider looking at the areas of materials and energy suppliers, according to a mid-tier accounting firm.

HLB Mann Judd Perth corporate and audit services partner Marcus Ohm said the IPO market had a similar number of listings for the first half of 2022 as it did last year, but the capital raised was significantly less.

“We’ve seen 59 listings so far in 2022. That compares with 61 listings this time last year,” Ohm revealed while presenting the latest “HLB Mann Judd IPO Watch Australia Mid-Year Report”.

“It has been a process whereby the volumes have been okay, but it’s been pretty much materials companies that we’ve seen that have been listing.

“While the numbers have held up, the actual amounts raised have decreased quite a bit and are down to $790 million in funds raised compared to $2.9 billion this time last year, and if you look at the whole of 2021, just over $12 billion was raised.”

He pointed out the decrease in the number of listings and their size took place across both large-cap and small-cap companies, but the latter, which had a market capitalisation of $100 million or less, were dominated by materials businesses and it was likely that trend would continue.

“We have seen more small caps come through and that is really to do with the materials sector, which has been around 80 per cent of all new listings,” he said, adding the remaining IPOs were comprised of diversified financials, healthcare equipment services, and commercial and professional services,” he said.

Looking at specifics, he noted an increase in the demand and price for lithium, which is used in batteries, meant it was one of the few sectors that could be invested in with confidence.

“However, that will depend on particular projects and company specifics and in terms of share price performance you really have to look at what the expectations are for the future and lithium is the only clear-cut winner that you look at [with battery materials],” he explained.

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