This year has brought on a flurry of initial public offerings (IPOs) ranging from new tech start-ups to BNPL platforms. There have been 51 new floats so far, with another 35 to come before the end of July. There were 27 listings in the last two months alone. The total figure for 2021 looks at this stage likely to beat last year’s 113 IPO listings, which itself was up 23 per cent from 2019. The most successful listing this year has been manganese project developer Firebird Metals (ASX: FRB), which has surged 243 per cent from its IPO price. Globally, the best performer has been mobile telco player UTtime Limited (NASDAQ: UTME) which has skyrocketed by 1,191.50 per cent to $51.66 from an IPO price of $4.00.
That said, the events of recent weeks have shown that IPOs aren’t for the faint-hearted and in some cases are simply opportunities for large investors to cash-out. The performance of a number of high profile IPOs in late 2020 including Adore Beauty (ASX: ABY) and Nuix Ltd (ASX: NXL) has been well below that expected by shareholders.
The most profitable ASX IPOs this year so far were as follows:
The largest IPO of late has been consumer finance firm Latitude Financial (ASX: LFS), which raised $150 million at $2.60 a share for a $2.6 billion market capitalisation. All eyes now, however, are focused on online property settlement network Property Exchange Australia (PEXA) with its $3.3 billion float on the ASX set for late June.
The float has received significant media attention after the company became the subject of an aggressive takeover. Kohlberg Kravis Roberts (KKR) and Nine-controlled Domain Holdings Group (ASX: DHG) put forth an aggressive $3.1 billon takeover bid that expired last weekend but ultimately forced the hands of major shareholder Link Administration (ASX: LNK) to take action.
The PEXA board conducted a rapid book-build process over the weekend to test the waters against the consortium bid. Its largest shareholder, Link, decided an IPO was the best path and closed the door on a trade sale of the platform. The lead managers for the IPO, which are Morgan Stanley, Barrenjoey Capital, Macquarie and UBS, were then able to “use the bid price to leverage a $3.3 billion valuation for the platform from institutional investors,” as mentioned by the media.
According to the Sydney Morning Herald much of the “$1.18 billion will go to Morgan Stanley Infrastructure Partners, which has agreed to sell its entire 40 per cent stake. Link will increase its 44.2 per cent stake slightly as it exchanges shareholder loans for more PEXA shares. Meanwhile, Commonwealth Bank is also expected to acquire shares in the IPO process to lift its stake above 15.8 per cent.”
So, what does PEXA do?
PEXA stands for Property Exchange Australia and is an electronic lodgement network system providing for
- preparation of electronic dealings and verification of lodgement acceptability for real property
- electronic settlement of real property transactions including payment of settlement monies, duties, taxes and any other disbursements, and
- electronic lodgement of dealings to the appropriate land registry.
The company said its “world-first digital settlements has revolutionised the way we exchange property in Australia. By providing quicker access to the proceeds of a sale and near real-time tracking on property settlements, our network of financial institutions and legal and conveyancing firms helps over 20,000 families a week safely settle their homes.”
PEXA assists lawyers, conveyancers and financial institutions to lodge documents with land registries and complete financial settlements electronically instead of doing it manually. According to Actionconveyancing, “Paperwork and postage increased the risk of errors and delays. 20 per cent of settlements were delayed a median of seven days and 25 per cent of these customers suffered financially.”
Currently the system is extremely manual and tedious. Some processes date back to the colonial days when settlement was done via exchanging of cheques. Therefore, state governments have a keen interest in making the platform a success. And it shows in the numbers. The company was loss-making but has gone from strength to strength. In Link’s financial forecasts, it shows PEXA expected revenue to hit $218 million for the financial year ending June 30, 2021 and $247 million for FY22. PEXA generated operating EBITDA of $51.5 million on revenue of $99 million for the half-year.
This is definitely an IPO to watch.
Here are the other upcoming IPOs on the ASX.