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IPO outlook looking more positive |
22 July 2009: As expected, Deloitte’s latest IPO survey recorded a sharp drop in the number of floats and value of funds raised in the financial year ended 30 June 2009, however the outlook is more positive than 12 months ago.
According to Deloitte Corporate Finance partner, Steve Woosnam, “Australian equity markets have shown a strong appetite for rights issues and placements in the last year with billions of dollars having been raised.”
“As such, the equity markets have shown significant capacity to invest and with the ASX now showing signs of recovery, it looks increasing likely that there will be demand for new issues. In particular, equity represents a viable source of funding as debt is still in scarce supply,” he said.
The survey shows that the number of floats decreased from 201 in 2007-08 to just 27 in 2008-09, while the value of funds raised dropped from $5.9 billion to $1.1 billion.
Excluding funds raised from the Brisconnections float in the first quarter of 2008-09, there was only one other float which raised in excess of $100m being Ivanhoe Australia which listed in August 2008. Ivanhoe was one of the 22 energy and resource stocks which dominated the listings from a sector perspective
There were however some surprisingly good share price performances of the small number of IPOs that have listed in 2009 to date.
Mr Woosnam said all seven IPOs to list since the beginning of 2009 were trading above their issue price, with an average premium of 11% at 30 June 2009. The two most recent floats - Ausmon Resources and Norseman Gold - had increased by 30% and 29% respectively.
The best performing IPO of the year was iron ore and base metals explorer Emergent Resources, which finished the year at a 150% premium to its 20 cent issue price.
The average share price change across all IPOs in 2008-09 was a loss of -29% consistent with the wider All Ordinaries Index .
The outlook
“As you would expect, history shows that IPOs are strongly linked to improvements in the ASX index,” said Mr Woosnam. “As such, the likelihood of IPOs in the first half of FY10 would appear strongly dependent on continuing upward momentum in the equity markets to ensure companies achieve value on listing.”
“It is also worth reflecting that some of the larger companies to list just after the dotcom boom and during the market downturns in FY02 and FY03 (the index recording negative returns in both years) have fared well since listing in uncertain conditions.”
Mr Woosnam said the infrastructure and utilities sector led the recovery in IPO activity after the dotcom crash. “The sector generated almost half of the $2 billion raised by IPOs in 2001-02, thanks to floats such as Macquarie Airports ($500 million) and GasNet Australia ($260 million),” he said.
“Infrastructure continued to be a large component of the IPO market in 2002-03 with raisings from Transurbun and Southern Cross Fliers Trust, although fund raisings that year were dominated by the $1.9 billion float of Promina, which accounted for 45% of the $4.2 billion in total funds raised.”
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IPO outlook looking more positive
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