Insights for Investors by Investors

Billion-dollar game – IPO parade not slowing down

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Strong momentum in the IPO market has continued unabated, with 61 new listings in the first half, according to the latest IPO Watch Australia Mid-Year Report issued by HLB Mann Judd.

Marcus Ohm, partner in the firm’s corporate and audit services division, highlights that there was a significant increase from 12 listings for the same period in 2020, which “was heavily impacted by market falls during the early stages of the COVID-19 pandemic.” The strong performance was clearly shown from the $2.9 billion raised, in comparison to the $132 million in the first half of 2020. The big jump in raisings was driven by 13 additional ‘larger’ listings that were above $100 million in size. In the June quarter alone, 39 of the 61 listings occurred, with nine large caps.

Ohm attributes the increase in activity to “favourable macro-economic and capital market conditions together with strong investor sentiment and reflected the strength of the market as a whole with the S&P/ASX All Ordinaries index growing by 11% over the six-month period.” Also, it is worth noting that the small-cap sector contributed, with 48 new listings for the period raising a total of $462 million, with the Materials sector doing well. It had 26 new small-cap listings compared to only three in the comparative period in 2020. What was interesting is that there were five out of thirteen large-cap IPOs in 2021, when usually, Materials listings are small caps.

Outside of the Materials sector, which had 51% of all new floats, other industries also performed well, says Ohm. Retailing and Pharmaceuticals, Biotechnology & Life Sciences sectors had four new listings each during the period, while Software & Services, which historically has been a strong IPO sector in terms of volume only, had three new entrants during this period raising a combined $31 million.”

According to the report the average first-day gain across all new listings was 21% and the average period-end gain was 6%. The strongest performers in terms of share price included Firebird Metals Limited (ASX: FRB, 208% gain) and Pentanet Limited (ASX: 5GG, 170% gain). This period has also seen five foreign listings (2020: two), including Keypath Education International Inc (ASX: KED) and Chimeric Therapeutics Limited (ASX: CHM). which both have US-based operations.”

In summary, Ohm says the new listings pipeline is “looking very healthy with 42 upcoming floats preparing to list and seeking to raise a further $1.25 billion.”

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