Wise-owl's IPO market review for February to July emphaises the strong conditions for Initial Public Offerings on the ASX.
Buoyant conditions have sustained in Australia’s equity capital market during the first half of the 2015 IPO season. Quantity and value of listings paired back from record activity levels witnessed in late 2014, however IPO market conditions remain in boom territory.
Versus the previous year’s corresponding period, deal value approximately halved, however the quantity of new listings and performances remained robust. Against flat overall benchmark indices over the past 12 months, average returns amongst new IPO’s stand close to double digit territory.
The outperformance has seen a shift in risk appetite. After dominating activity in late 2014, listings by mature, established companies conceded market share to less advanced ventures. Offerings seeking development capital were generally well received, however appetite for highly speculative ‘discovery’ phase ventures remains fragile at best. Inherently higher risks associated with these phases of the corporate life cycle saw win rates recede versus late 2014, when mature offerings were the only source of activity.
After accounting for over 90 per cent of funds raised in the second half 2014, vendor sales represented just over half of overall activity. The decline was driven by withdrawal of a billion dollar offering from insurance group, Greenstone. The abandoned sale was the largest to greet the ASX since construction group Valemus withdrew its $1.3billion offering five years ago.
In Greenstone’s absence, the period’s largest offering was executed by enterprise software provider, MYOB Group (MYO.ASX). After raising $833million, MYOB’s shares have witnessed a muted debut to date. Amongst the vendor sales, vehicle leasing specialist, Eclipx Group (ECX.ASX) provided the strongest performance for new investors. After raising $253million, its shares are over 30 per cent above the listing price.
Replacing exits as the dominant driver of the IPO market were offerings seeking development or expansion capital. This category hosted the period’s hottest listing, with Asia Pacific fibre optic infrastructure developer - Superloop (SLC.ASX), more than doubling after raising $17.5million. However as per their higher risk profile, development stage offerings witnessed a larger variance in performance. Medical software group, 1st Available (1ST.ASX) saw its shares plumb more than 50 per cent upon listing, whilst mobile marketing group, Otherlevels Holdings (OLV.ASX) is trading more than 20 per cent below par.
Period: Feb – Jul 2015
ASX Listings: 28
Capital Raised: $3,874million
Average Return: 9%
Win Rate: 57%
Author: Tim Morris
Aug 12, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.