By Marcus Ohm
The first half of the year has seen a strong market for initial public offerings (IPOs), setting the scene for what is likely to be a positive 2018 for IPOs.
While there were fewer listings in the first six months of 2018 compared to 2017 – 39 compared to 57 – this year has still outperformed the previous five-year average of 37 listings.
Usually, around two-thirds of listings take place in the second half of the year, so 39 listings in the first half of the year is a strong start.
Indeed, 2017 was an anomaly in that the listings were relatively evenly spread throughout the year. In total, there were 110 listings during 2017, and 57 of them – just over half – were in the first six months.
In terms of share prices, IPOs performed well overall with an average first day gain of 16% and average gain to the end of June 2018 of 6% compared to the 2% increase in the All Ordinaries in that same period. Whilst there were some good gains, 23 out of 39 companies finished the period below listing price. It is important that investors do their research and read and understand the Prospectus which details the risks of investing in that company.
Looking ahead, the small cap, junior exploration companies in the resources sector appear to be the strongest contributors to upcoming 2018 listings in terms of numbers.
On 1 July 2018, there were 35 companies that had applied to list on the ASX, and eleven of these are in the Materials sector.
Technology stocks are also showing signs of improvement, with a further eleven companies in Technology, Biotech and Software & Services applying to list. Technology stock activity should be a positive for the ASX, as these sectors are often comprised of larger companies.
Overall, there is a broader range of companies planning to list in 2018, with Real Estate, Food, Beverage & Tobacco, and Capital Goods, each having several listings in the pipeline.
First published in Money Magazine