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MEDIA RELEASE: The number of initial public offerings (IPOs) in the first half of 2020 was considerably lower than at the same time last year, according to the latest HLB Mann Judd IPO Watch Australia Mid-Year Report, with just 12 new listings this year compared to 23 in the first six months of 2019, and to the five-year average of 34 listings.

“While the first half of the year historically experiences lower volumes of listings, the COVID-19 pandemic has clearly had a significant impact on the IPO market,” said HLB Mann Judd partner and author of the report, Marcus Ohm.

“There were multiple listings which were subsequently withdrawn during the period amidst difficult market conditions. This is not surprising as market uncertainty and share price volatility do not generally provide a listing-friendly environment given the significant costs involved in undertaking an IPO.”

Most of the IPOs took place during the first quarter, with only three listings in the June quarter.  The majority of the funds raised was also in the first quarter – $87.5 million compared to $44.5 million in the second quarter.

“These difficult market conditions are also reflected in the upcoming pipeline of activity with only one new listing noted at the end of June 2020,” said Mr Ohm.

The total amounts raised from new offerings also fell significantly compared to the same time last year. Only $132 million was raised over this period compared to $823 million raised over the same period in 2019 and $2.5 billion in the first six months of 2018.  

This was primarily due to the lack of large cap IPOs with only one new listing so far this year, Atomo Diagnostics Limited (ASX: AT1), which had a market capitalisation greater than $100 million upon listing.  During the same period in 2019, there were 10 new large cap listings raising a combined total of $663 million.

Overall, the majority of listings were from the small cap sector (less than $100 million market capitalisation at listing), with 11 new entrants.  

“Interestingly, the number of small cap listings remained consistent with the previous period, when there were 13 listings, showing the impact of market conditions on larger cap listings,” Mr Ohm said.

“Of those companies that successfully listed, overall share price performance was favourable.  Newly listed companies achieved an average gain of 16 per cent compared with the overall 12 per cent loss recorded on the wider market. 

“Furthermore, one-third of new listings recorded a gain of 35 per cent or more by period end, meaning the IPO market did provide some opportunities for investors in a difficult market.”

Mr Ohm said that amidst the COVID-19 pandemic, the near term horizon is difficult to predict due to the significant uncertainties involved. 

“As uncertainty is generally a factor which negatively impacts IPO volumes as well as the broader market, the appetite for new listings is likely to remain challenging in the near term. 

“The degree to which there is a recovery in the pipeline will be heavily influenced by broader macro concerns and ongoing risk associated with the pandemic. It will be interesting to see the extent of any recovery in the IPO market prior to 2021.”

HLB Mann Judd is an Australasian association of independent accounting firms and business and financial advisers, with offices in Australia and New Zealand.