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IPO market booming as miners come back into favour

IPO market booming as miners come back into favour
Resources companies have worked their way back into the ASX as speculative appetite for mining floats is on the rise after several years of muted investor interest.
Aug 02, 2017 By Tim Morris Tags: IPO

The Australian IPO market is booming, with nearly 60 companies hitting the boards of the Australian Securities Exchange in the first half of the year — raising a total of $1.73 billion.

Resources companies have worked their way back into the ASX as speculative appetite for mining floats is on the rise after several years of muted investor interest.

Even though companies raised significantly less than last year, the number of initial public offerings skyrocketed by nearly 80 per cent to 59 listings. IPOs outperformed the ASX 200 by 5.4 per cent during the first six months and delivered an average mean first-day return of 15.3 per cent.

Performance was strong, but the quality of many floats is mixed at best, as numerous listings are speculative in nature and often somewhat premature. Wise-owl intelligence suggests that up to 20 per cent of all IPOs will struggle to create shareholder value in the long term. Materials and financial companies witnessed the highest number of listings, accounting for 47 per cent of all IPOs.

While a number of mining companies have disappointed, it is worth noting that the two best performing IPOs were Alderan Resources (AL8) and Ardea Resources (ARL), both still in the pre-revenue exploration stage. Australia is known to have an appetite for risk and it probably won’t fade anytime soon.

The IPO market, also known as the primary market, has traditionally been reserved to a very exclusive group of investors, but technology has disrupted the industry in the past few years.

Companies like OnMarket offer retail investors easy access to IPOs and pretty much everyone with an internet connection can now participate in bids previously only available to selected institutional investors.

However, while the performance in the past few years was strong, with opportunity comes an element of risk. The need for research and appropriate education is higher than ever.

Click here to read the full report

 

Period: January 1 - June 30

Number of IPOs: 59

Total deal value: $1,727.8m

IPO performance: +6.4pc

 

This article was first published in The Australian

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Tim Morris Author: Tim Morris Aug 02, 2017

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.


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