A bounce-back in the June quarter has lifted initial public offering (IPO) activity for 2005-06 to a projected $13.2 billion in funds from 170 IPOs, according to a quarterly IPO report by Deloitte Corporate Finance.
This total represents a 29 per cent increase in the value of funds raised by IPOs over 2004-05, even without the $3 billion Snowy Hydro float.
The report found that 55 IPOs, with total funds raised of $2.4 billion, were expected to list in the June quarter, which closes today.
It also found the average share price gain for all floats improved substantially from 13 per cent in 2004-05 to 21 per cent in 2005-06, although this was skewed by the effect of very high returns from a number of small-cap resource IPOs. Running off the back of strong commodity prices, nine of the top 10 performing IPOs came from the resources sector.
The “average experience for investors was better reflected” by returns from the 10 largest IPOs, accounting for 70 per cent of all funds raised during the year, according to Deloitte Corporate Finance partner, Steve Woosnam. “These IPOs averaged a return of minus 6 per cent, a sharp reversal from the 17 per cent gain in the previous year.”
Woosnam said this “reflected a number of factors, including the number of utility floats in the year, which tend to be yield rather than growth plays, and may also reflect the fact that IPOs this year have been fully-priced relative to the market.”
This year’s largest floats also “failed to produce any stellar gains, such as with Babcock and Brown, which last year boosted the top-10 average by posting a gain of almost 170 per cent.”
