IPO activity tops $13 billion in latest financial year after bounce in June quarter

Contact: Steve Woosnam
Deloitte
Partner, Corporate Finance
0414 607 531

IPO activity is set to top $13 billion in 2005-06 after a bounce back in the June quarter, according to the latest quarterly IPO Report by Deloitte Corporate Finance.

The report found that 55 IPOs with total funds raised of $2.4 billion were expected to list in the June quarter by the time it closes at the end of the week.

The bounce back in new company issues in the latest quarter will lift IPO activity in the financial year to 30 June to $13.2 billion from 170 IPOs. This represents a 29% increase in the value of funds raised compared to the previous financial year, even without the $3 billion Snowy Hydro float.

The average share price gain for all floats improved substantially from 13% in 2004-05 to 21% in 2005-06, but this was skewed by the effect of very high returns from a number of small capitalisation resource IPOs. Running off the back of strong commodity prices, 9 of the top 10 performing IPOs came from the resources sector.

Deloitte Corporate Finance partner, Steve Woosnam, said the average experience for investors was better reflected by returns from the 10 largest IPOs, as these accounted for 70% of all funds raised during the year.

"The 10 largest IPOs averaged a return of minus 6%, a sharp reversal from a 17% gain in the previous year.

"This reflected a number of factors, including the number of utility floats in the year which tend to be yield rather than growth plays and may also reflect the fact that IPOs this year have been "fully priced" relative to the market."

"This years largest floats also failed to produce any stellar gains such as Babcock and Brown, which last year boosted the top 10 average by posting a gain of almost 170%."

Mr Woosnam also said that most of this year’s big IPOs came to the market in the second half of the year, a period of significant correction in equity market prices.

"This undoubtedly kept a lid on IPO share price performances in the second half of the year.

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