The pipeline is soft for IPOs on the Australian Securities Exchange after a slow end to 2018. There are only 17 upcoming floats this year, down on the 37 that had applied to the ASX at the same time last year.
According to HLB Mann Judd’s IPO Watch Report, the prospects for this year are reflective of the wider overall market with the ASX 200 dropping 10 per cent in market value from the peak it reached in August 2018.
“Companies considering listing will need to clearly articulate their offerings and provide sound investor communication,” HLB Mann Judd partner and author of the report, Marcus Ohm said.
The total funds raised in IPOs in 2018 reached $8.44 billion, which is an increase of 106 per cent on the 2017 funding.
The increase in funding came from the three largest IPOs of the year – Viva Energy Group, Coronado Global Resources Inc and L1 Long Short Fund Limited, which raised $4.75 billion between them for 64 per cent of the total.
Despite the increase in funding, several new entrants struggled to raise capital. Only 72 per cent of new listings met their targets. This is a decrease on the 79 per cent and 83 per cent of targets met in 2017 and 2016 respectively.
The small caps dominated IPO entries and performed well with 55 of the 72 successful in meeting their capital goals.
The materials sector recorded 35 listings, which is a sharp increase compared to the 2017 listings of only 29.
Last year’s IPOs fell from issue prices by an average of 18 per cent by year end. It was the worst performance for IPOs on the ASX since 2011. Large IPOs were the worst performing, with an average year end price fall of 27 per cent.
Only 20 of the 93 companies listed on the ASX in 2018 ended the year above issue price.
This is the only time in recent history that a loss has been made on year end performance for IPOs.
The floats also underperformed on their first day with share prices gaining just five per cent. Only 47 listings ended their first day above their listing price.
The best performing stocks were from the small cap sector (less than $100 million) with Adriatic Metals up 188 per cent from its issue price by year end, and Exopharm up 175 per cent. From the large cap sector, Elixinol Global was the strongest performer with its stock up 150 per cent.
The outstanding segments for IPOs were consumer durables and apparel at 96 per cent, followed by household and personal products at 87 per cent and pharmaceuticals, biotechnology and life sciences at 54 per cent.
The worst performing sectors included telecommunications, down 60 per cent, consumer services (down 42 per cent), technology, hardware and equipment (down 35 per cent) and diversified financials at (down 32 per cent).