The initial public offering (IPO) market continued to strengthen in 2016, with an increase in both the number of listings and the total funds raised over the previous year, according to the latest annual HLB Mann Judd IPO Watch report.
During 2016 there were 94 new IPOs, compared to 85 in 2015 and 70 in 2014, and a five year average of 72 listings. The total funds raised increased slightly in 2016 to $7.5 billion, an increase of seven percent on 2015 ($7.02 billion) and the previous five year average of $7.24 billion, which was inflated by the record set in 2014 of $16.70 billion when there were several very large IPOs.
Marcus Ohm, author of the report and partner at HLB Mann Judd Perth, said the IPO market is looking healthier than in previous years on most metrics.
“Over the last few years, we have seen a steady increase in both the number of IPOs taking place, and the funds being raised.
“In addition, we are starting to see a good balance of newly listed companies in terms of both market capitalisations and sector representation, which is a very healthy sign.
“Following the global financial crisis, the IPO market was dominated by small cap* companies and by the mining and resources sector, almost to the exclusion of anything else, while in recent years, large caps have been dominant. However the market is now much more balanced.
“For instance, in 2012 small cap companies made up 93 percent of listings but in 2016 they comprised 68 percent of all new listings,” he said.
Another key indicator of the health of the market is the fact that subscription rates for IPOs improved significantly during 2016.
“In total, 83 percent of all new listings met or exceeded their subscription targets, and new IPOs obtained 102 percent of total funds being sought. This is a positive step from 2015 and 2014, when only 68 percent and 65 percent of companies respectively were able to meet their funding targets,” Mr Ohm said.
“Furthermore, subscription rates were relatively well spread across all market capitalisation brackets, unlike previous years when small cap companies have struggled to meet their targets.”
Mr Ohm said that the scene is set for a stronger year for IPOs in 2017, especially in the Materials sector.
“At the start of 2017, there were 23 companies planning to list, an increase of 15 percent over the same time last year.
“Most notably, the recovery in the Materials sector looks set to continue with 11 explorers, miners and associated businesses waiting to list. A significant proportion of these are focused on lithium and cobalt, a sign of the continuing push for materials used in the creation of energy cells.
“The largest planned listing is India Fund Limited, an investment company seeking to invest funds in Indian listed companies. It is seeking to raise $50 million which is approximately one-quarter of all funds in the pipeline.
“Last year, technology companies dominated the IPO pipeline but this year, only one technology company is seeking listing, raising $5 million.
“The ongoing sector diversity also highlights an improving market, with 20 different industry sector represented in 2016 (2015: 21; 2014: 17),” 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
For more information please contact:
Phone: 08 9267 3225 or 0421 610 527