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Australian IPOs holding half-time lead
Deloitte mid-year review
4 September 2015: Following a year of record listings in 2014, initial public offerings (IPOs) on the ASX have settled into more modest territory, according to a new Deloitte mid-year review.
At the close of the first half of calendar year 2015:
- 30 IPOs have raised $2.5bn
- This was more by number than the 22 listings in same period of 2014
- Funds raised were significantly less than the $4.6bn raised in the first half of 2014.
Deloitte Corporate Finance partner and Head of Transaction Services, Ian Turner, said: “Despite the differences, half-on-half year comparisons show that debut growth has improved.
With market fundamentals largely unchanged, and to absorb capital, IPO proceeds should find it easier to meet their targets going into the second half of 2015 as the wave of listings continues.”
The Deloitte 2015 IPO Market Update has been developed in conjunction with M&A intelligence provider Mergermarket.
Highlights and trends include:
- Of the 48 listings as of 21 August 2015, 21 had market capitalisations in excess of $75m, generating a weighted share price performance gain of 7.2% (while the ASX 200 declined over this period by 4.1%)
- Technology, media, and telecommunications led listings for 1H15, accounting for 47% of listing values, and 27% of all IPOs, as favourable conditions added to confidence among tech companies and financial sponsors that IPOs are viable and present attractive options to raising growth capital
- Financial services stood out for its 21% share of listing values, with six IPOs
- Property and construction companies also received strong investor support, accounting for 10% of listing values
- The average performance of all companies that listed in 2014, over the course of the first half of 2015, was 12.7%
- Private equity-backed listings generated $1.7bn, and accounted for 67% of total listing values for the half year. This surpassed full-year deal statistics for 2014, when private equity exits and equity sales via IPO accounted for 46% of listing values following a four-year hiatus from the market.
Turner continued: “The IPO wave of 2014, fuelled largely by pent-up supply as companies and private equity owners capitalised on improving market conditions and a window of opportunity following three years of sluggish activity has yet to break.
“A strong pipeline still exists as managers and financial sponsors prepare their companies for the public markets.
“2014 listings have continued to build on their performance and significantly outperformed the ASX. And despite global volatility, we are seeing strong investor confidence given the quality of IPOs. You only have to look at the listings for the first half of 2015 and their impressive performance.
“On average, shares of companies that listed in 2014 outperformed the market. But as the supply of sizable listings becomes constrained, investors become more selective, and sceptical, of IPOs, issuers will need to find ways of raising their attractiveness among competing listings.
“Raising their attractiveness, and value, is one component to encouraging investors. So companies that want to be truly effective will have to make the proposition simple via a well-articulated story for their business. Stocks that struggled to go public this year were typically not well understood by the market.”
Deloitte Transaction Services director, Tapan Verma, added: “On the other hand, we’ve seen some great successes with the likes of Eclipx and Pepper Group, both with impressive management teams, clearly defined strategies and growth plans.
“Investors also took to the confidence displayed in the listings by the private equity and founding owners who retained significant stakes in the businesses, and the long-term incentive schemes put in place.”
Turner concluded: “Looking to the remainder of 2015, shaken sentiment on the heels of the crisis in the Eurozone and correction of China’s Shanghai exchange is abating, although market volatility and global events will without doubt continue to play a role in the strength of Australia’s IPO pipeline here.
“It’s encouraging to see that ASX listings in the last two years have held their own, which reflects the quality that investors have come to expect.
“And there’s a lot of positive news coming out of this reporting season with the vast majority of 2014 listings exceeding their prospectus forecasts.”
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