A rising tide of 2017 IPO listings, as 2018 promises to continue delivering
Australia’s IPO market delivered more than a few surprises in 2017.
15 March 2018: Australia’s IPO market delivered more than a few surprises in 2017 – including the the largest number of ASX listings since the global financial crisis (GFC) and a remarkable performance overall.
According to Deloitte’s latest annual IPO review:
- 115 companies successfully listed in 2017, compared with 94 in 2016 and 97 in 2015
- Weighted average performance for the year was 36.0%, the strongest seen over the recent years
- $6.7 billion of capital was raised, down approximately 15% on the prior year
- Market capitalisation of $11.1 billion
- 29 IPOs exceeded $75 million in market capitalisation, accounting for 87% of all new capital raised
- Financial services was the dominant sector, accounting for nearly 47% of the listed market
- 86 small cap/emerging companies comprised 75% of new listings by volume, with $820 million of new capital raised and new market capitalisation of $2.2 billion
- 25 overseas-based companies successfully listed on the ASX, raising $512 million and achieving end-of-year market capitalisation of $1.71 billion.
According to Ian Turner, Deloitte’s National M&A Leader: “Initially expected to be one of the more muted years for equity capital markets in Australia over the last five years, 2017 should have silenced a few critics.
“In terms of sizable deals, investor caution was often cited as being responsible for the $6.7 billion of capital raised, and private equity firms were largely absent as they embarked on their investment phase. However, the year also saw a significant rise in corporate M&A, with the first half seeing a number of assets where takeovers were priced above mooted IPOs, a trend that continued later into the year.”
Tapan Verma, Deloitte’s Lead Director for IPO Services, said: “From the time of listing to year-end, overall IPO weighted average returns of 36.0% were the strongest we have seen in years, comfortably exceeding the index growth over the year and well in excess of prior year listings.
“The Class of 2017 was dominated by emerging companies,and even though these small caps represented only 12% of the total capital raised via IPOs on the ASX in 2017, it is important to recognise the value these growth companies bring to the market and the economy.
“The ASX continues to demonstrate that the IPO market is a true barometer for and engine of growth, giving a number of these talent-rich companies an avenue for raising capital and delivering future earnings growth and employment. Small caps certainly remained heavily in favour, delivering average gains of nearly 70%.”
By industry, new listings were dominated by the financial services sector, with firm value at listing of $5.2 billion added to the ASX, representing 46.8% of the total listings,.
“Financial service businesses were a key driver of IPO activity in 2017, with 17 new listings, followed by commercial services, energy and resources and healthcare.
Ian Turner added that: “The ASX also continued to be a magnet for inbound listings of foreign-domiciled businesses, and the Asia-Pacific region was the stand-out region and performer globally, accounting for over 50% of listings around the world, driven by investor confidence on the back of economic growth, supportive macro-economic fundamentals and momentum in equity markets.”
Aaron Black, Head of Equity Capital Markets Advisory said: “Looking forward to the rest of 2018, the economic fundamentals certainly remain in favour.
“Stronger economic growth, and lower unemployment, are positives for the IPO outlook, which we believe will see capital raising volumes comfortably exceed 2017 if the large mooted floats, including Latitude and Colonial First State, together with the likes of Prospa Advance, take off.
“Eyes are clearly at this point in time on Latitude, which will not only test market appetite and investor confidence in large floats, but reflect the attitude of institutional investors to private equity-backed assets.”
According to Deloitte Access Economics who contributed to the report, Australia is set to enter a near-term sweet-spot of continued record-low interest rates combined with improving economic performance – and so remains an attractive investment destination across multiple sectors, from tourism and international education to resources and healthcare – and supportive of related IPO activity.