SHARES

Strong turnaround for IPOs after slow start in 2019

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Share prices for 17 of the 23 new listings or initial public offerings (IPOs) jumped, on average, by 21% on the first day of trading over the 2018-19 financial year.

In terms of share price growth after listing, there was an average gain of 63% across all new entrants to June 2019.

This represents a significant turnaround compared with the previous year's listings, which lost an average of 18% by year end relative to their listing price.

IPO listings had a slow start in 2019 and most occurred in the second quarter. The lack of activity in the first quarter of the year was possibly reflective of equity market conditions at the end of 2018.

ipo turnaround

While the volume of IPOs was lower than in recent years, those companies that did list generally were well supported by investors, both at listing and also subsequently.

Subscriptions for new listings did well, with 19 out of 23 meeting their target, raising on average 100% of the total subscription funds sought. There was also a substantial increase in underwritten offers representing 39% of all new listings, compared with 17% for the same period in 2018.

The small cap sector (less than $100 million market capitalisation at listing) has been notably subdued with only 13 offerings, but the large cap sector has been well represented in new listings for the first half of 2019, accounting for 10 of the 23 launches.

An underlying reason behind the drop in IPOs this year compared with the past couple of years has been the materials sector.

Materials had only three new listings for the period, compared with 16 for the same period last year. The reduced activity perhaps reflects broader macroeconomic issues and current investor sentiment.

However, the broader share price gains have been a particularly good result and represent a return to the trend of IPOs tending to outperform the market, which has had a good six months.

Most industry sectors also performed well, with 10 recording first-day gains and 10 also recording positive gains on average to June 30, 2019.

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Marcus Ohm is partner, corporate and audit services, with HLB Mann Judd in Perth.
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