Small cap IPO market outpacing large listings

While the number of IPOs completed in the first half of 2017 is higher than the same period in 2016, total deal value is down with no signs of improvement according to a mid-tier firm.

Yesterday, HLB Mann Judd released its first ever IPO Watch Mid-Year Report, revealing that the first half of 2017 has been strong for Australian IPO activity.

Between 1 January and 30 June 2017 there were 57 listings, compared to 34 listings during the same six month period in 2016.

“The first half of 2017 has seen a strong performance in what is historically a quieter period for new listings,” says Marcus Ohm, partner at HLB Mann Judd Perth.

“It sets the scene for a solid 2017 in terms of IPO numbers, as we would anticipate a higher number of listings in the second half of the year compared to the first half.

The report found that the small cap sector, which refers to companies with a market capitalisation of $100 million or less, catered for 86 per cent of all IPOs in the first half of the year.

As a result, the total amount raised in the first half of 2017, which was $1.9 billion, was lower than the $2.5 billion raised in the first half of 2016.

Mr Ohm said that it is striking that there has been an absence so far this year in very large listings.

“This time last year, we had seen two companies list with a market capitalisation of around $1 billion and 11 companies list with a market cap over $100 million. So far in 2017, there has only been one listing with a market cap greater than $500 million, and seven with a market cap between $100 million and $500 million,” he said.

“The current pipeline of listings for the remainder of 2017 does not show any particularly large listings on the horizon. As at 30 June, 21 companies have applied to list and junior exploration companies are likely to be a strong contributor, particularly the materials sector which currently has 10 proposed listings, seeking to raise a total of $75.5 million.”

Mr Ohm also highlighted a marked decline in the number of reverse takeovers, or backdoor listings, following changes to the ASX listing rules.

“With only 10 reverse takeovers in the first six months on 2017, it is clear that the recent attractiveness of this listing route has significantly reduced. In contrast, there was a total of 69 backdoor listings in 2016 which highlights the extent of the reduction in the first half of 2017.

“The changes to the ASX listing rules, which came into effect in December 2016, have made the reverse takeover route much less attractive. Of the 10 reverse takeovers this year, all started proceeding prior to the new rules coming into effect. Most occurred in the first quarter of this year, with only two taking place in the second quarter. We would expect this trend to continue for the remainder of the year.”

 

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