Volatility in China and falling commodity prices are major factors driving equity investors to back initial public offerings (IPOs), research reveals.
Data from Deloitte Australia and Merger Market found that IPOs raised $17.6 billion in 2015, with technology firms claiming 30 per cent of that sum – up from six per cent of the funds raised in 2014.
The Open for growth: Deloitte 2016 IPO report found that new private equity backed IPOs delivered an overall performance of 17 per cent in 2015, while the average performance over the last three years was reported to be 48 per cent – which was higher than the figure reported by Australian Private Equity & Venture Capital Association Limited (AVCAL) earlier this year, for the same period.
Deloitte director of IPO transaction services, Tapan Verma, noted that the performance of private equity backed IPOs did not match the public perception.
“We have also analysed the performance of private equity-backed listings and confirmed that overall results are far more positive than market sentiment reflects,” he said.
“Had you invested a dollar in every private equity-backed float from the start of 2013, and including some of the much talked-about misses, you would today be sitting on a portfolio return of 48 per cent. The results really speak for themselves.”
While the Deloitte and AVCAL report reflected positively on private equity backed IPOs, Platypus Asset Management chief investment officer, Don Williams, said his business had steered clear of several IPOs in the latter half of 2015 due to “obnoxious” pricing.
“Towards the end of last year there was some obnoxious pricing from some IPOs, and typically those didn’t get away,” he said.
“We passed on a lot of IPOs that were good companies, because we just thought the pricing was obnoxious, and it won’t surprise you to hear that most of those were coming out of private equity.”
