IPOs trending in 2016
You can expect the boom in initial public offerings (IPOs) to continue this year with 20 currently lined up to list on the ASX expecting to raise a total of $208 million. Keep an eye out for biotechnology companies, technology, a large dairy corporation, Bitcoin "miners" and workforce solution providers. The number of applications is higher than this time last year, indicating a stronger trend in IPOs this year, says Marcus Ohm, partner of corporate and audit services at HLB Mann Judd.
Investors who put their money into IPOs in 2015 typically outperformed the general market by 10% but only 62% of companies finished the year above their issue price, says Ohm. Investors who sold on the first day of trade did quite well with 69% of companies recording first day gains, up from 55% of companies in 2014.
Some 85 IPOs listed in 2015, up from 70 new companies in 2014. Ohm says IPOs were fairly diverse in 2015 and spread across 21 different sectors including technology (20% of IPOs), investments and diversified financials (25%) plus healthcare industries (10%). "Predictably, resource companies continued to perform poorly with only four listings in the energy and materials sectors," says Ohm.
Small companies dominated the IPO line up in 2015 but Ohm says that they generally found it difficult to meet their subscription targets, particularly companies seeking to raise less than $75 million. "Although a number of companies experienced difficulties in reaching full subscriptions in total new entrants raised over 91% of the total funds sought," says Ohm.
Ohm says it will be interesting to see the impact of the current sharemarket volatility and economic trends on IPO activity in 2016 plus the extent to which small caps can demonstrate value for investors.