Shocking year for IPOs

The average returns from initial public offerings (IPOs) have fallen by nearly 97 per cent compared to the 2006-07 financial year, according to research released by Deloitte today.

While the average return on an IPO for this financial year was a loss of 3 per cent, the average return last financial year was a gain of 91 per cent, Deloitte said.

Perhaps unsurprisingly considering the low returns, there has also been a sharp decline in the number of IPOs, with 75 per cent of all IPOs occurring in the first half of the financial year.

Deloitte Corporate Finance partner Steve Woosnam said that the average return on IPOs was actually even worse than the figures indicated, because the numbers were inflated by some good performances in the resource sector.

“The story of the past year is more accurately reflected by average loss of 29 per cent for investors in the 10 biggest IPOs of the past year. These floats accounted for almost 60 per cent of all funds raised in 07-08 and are more representative of the experience for most IPO investors,” he said.

He added that eight of the top 10 IPOs traded below their issue price at year-end.

The Deloitte research showed that the average share price gain of resource IPOs was 18 per cent, while the average for industrial IPOs was -35 per cent.