There was steady improvement in the initial public offering (IPO) market in 2015 for small caps*, with a number of signs pointing to growing strength for the coming year.
The latest annual HLB Mann Judd IPO Watch shows an increase in the number of IPOs in 2015 compared to 2014, and greater diversity in industry sectors across new listings during the year.
A total of 85 companies listed on the ASX in 2015, comparing favourably to 70 in 2014, as well as to the five-year average of 75 listings.
These 85 companies represented 21 different industry sectors, compared to 17 sectors in 2014, 15 in 2013 and just seven in 2012.
Marcus Ohm, author of the report and partner at HLB Mann Judd Perth, said the leading sector in 2015 was technology**, making up 20 percent of all listings (up from 16 percent in 2014) and raising $1.561 billion ($0.458 billion in 2014), or 22 percent of 2015’s total.
“In contrast, 2014 was dominated by healthcare and related companies, which raised $4.08 billion between them thanks largely to the Medicare Private and Healthscope listings. In 2015, they raised just $0.25 billion in 2015, although the number of listings increased from seven to eight.”
Mr Ohm said the greater breadth and depth in IPOs is an encouraging sign.
“While the total funds raised in 2015 ($7.02 billion) was down on 2014 (a record $16.7 billion), activity in 2015 was more evenly balanced.
“The IPO market in 2014 was dominated by several extremely large IPOs. Seven entities with a market capitalisation over $1 billion listed in 2014 compared to just two in 2015.
“At the other end of the market, there was a recovery in 2015 in the number of small cap companies undertaking an IPO, with 56 percent of listings coming from companies with a market cap of under $100 million, compared to 43 percent in 2014.
“This more even spread of IPOs is a positive sign for the market, showing that better opportunities exist for companies of all sizes considering a public offering.
“However, there are still areas of concern. For example, there was only one successful listing at the very smallest end of the market – under $10 million market cap – and it is likely that any significant improvement at this end of the IPO market is strongly linked to a sustained recovery in the resources sector.
“This sector continues to struggle with many existing listed vehicles being subject to backdoor listings during 2015,” Mr Ohm said.
He added that technology stocks look likely to continue their success story in 2016.
“Seven new technology companies were in the process of listing at the start of the year, seeking $68.5 million between them.
“As at the end of December 2015, a total of 20 companies had applied to list on the ASX in 2016, hoping to raise a total of $208 million, including biotechnology companies, a large dairy corporation, Bitcoin “miners” and workforce solution providers.
“This is a healthy start for the market, particularly compared to this time last year when only 14 companies had applied to list with a targeted raising of $114 million.
“Indeed, 2015 got off to a slow start but picked up pace during the year, with 39 of the 85 listings for the year taking place in the last quarter alone.
“It will be interesting to see the impact of the current market volatility and economic trends on IPO activity throughout 2016,” Mr Ohm said.
HLB Mann Judd is an Australasian association of independent accounting firms and business and financial advisers, with offices in Australia and New Zealand.
* Emerging, or small cap, companies are defined in this report as those with a market capitalisation of $100 million or less. All data excludes property trusts
** Comprising software & services and technology hardware and equipment
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