Australian Shares

IPOs offer limited opportunities

IPO opportunities

IPOs fell away sharply in 2022 and will offer limited opportunities for investors in the first half of this year due to difficult market conditions.

Investors looking for new opportunities via initial public offerings (IPO) were given limited openings last year with that trend set to continue into the first half of 2023, according to a report from a mid-tier accounting and advisory firm.

The HLB Mann Judd “IPO Watch Australia Report” found there were only 28 listings in the second half of 2022, compared to 59 in the first half, and the total number of IPOs for the year decreased by 54 per cent from 191 in 2021 to 87 in 2022.

HLB Mann Judd Perth corporate and audit services partner Marcus Ohm noted the decline in the number of IPOs was driven by a range of factors that impacted investment markets across the board.

“Perhaps more than any other year, 2022 was definitely a year of two halves,” Ohm said.

The first half of the year looked relatively healthy, with 59 new listings, which was comparable to the 61 at the same stage in 2021. However, the second half of the year saw the IPO market all but dry up.

“Macroeconomic and geopolitical issues, coupled with rising inflation, resulted in the Reserve Bank of Australia lifting interest rates for the first time in 12 years, significantly impacting the stock market and subsequently IPOs.”

Ohm acknowledged as a result of these factors, the amount raised via IPOs fell by 91 per cent in 2022, with $1.07 billion raised, compared to $12.33 billion in 2021, $4.98 billion in 2020 and $6.91 billion in 2019.

The muted level of IPOs and the current market conditions behind them will continue into the first half of this year, he added.

“Market uncertainty is continuing to inhibit any significant new listings coming to market, with only 10 small-cap entrants in the pipeline looking to raise an average of $8 million,” he explained.

“The extent of any improvement in the IPO market for 2023 will depend on the reduction in macroeconomic and geopolitical factors currently impacting markets.”

The report, which analyses IPO activity on a number of metrics, including listing volumes and share price performance, stated only 10 companies have applied to be listed on the Australian Securities Exchange (ASX) to date.

Of those 10 companies, nine have listed mining or mineral exploration as their principal activity, with the remaining company designing and developing artificial intelligence-enabled solutions.

Ohm noted private investment firm Bain Capital was also seeking advice on relisting Virgin Airlines on the ASX.

“If the company goes public in 2023, it will be one of the market’s biggest IPOs for some time and perhaps hints at greater confidence in the IPO market than the formal pipeline suggest.”


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