Majority of IPOs see positive gain

Despite challenging market conditions in 2020, there was an increase in initial public offerings (IPOs) with most new entrants finishing the year with a positive gain.

The average day one gain for IPOs was 31%, versus 24% in 2019, while the average year end was 34% – the same as in 2019.

Of those 74 new listings, 49 had posted a positive year-end gain and the second half of 2020 recorded 84% of the total listings.

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Marcus Ohm, HLB Mann Judd Perth, said the strong end to the year reflected the resilience of Australia’s economy amid particularly tough business conditions.

“COVID-19 brought with it a unique set of circumstances and the March and June quarters of 2020 saw historically low volumes with only 12 companies listing,” Ohm said.

“The June quarter in particular was heavily impacted by falls in the wider market and high levels of investor uncertainty.

“But there were signs of improvement by September, which was arguably reflected in Australia’s broader economic position, and the December quarter then experienced a resurgence in activity with volumes and funds raised being the highest in a single quarter since 2010.”

There were 74 new listings in 2020 with $4.98 billion raised, compared to 62 in 2019 with $6.91 billion raised.

However, both years had seen a decline compared to 2018 which saw $8.44 billion raised; this followed the trend during H1 which also saw a decline in funds raised.

“The fall in volumes impacted on total funds raised with the first half of the year total of $132 million representing just 3% of the total funds raised for the year,” Ohm said.

“The largest amount raised during the first quarter was $30 million by Atomo Diagnostics which was also the only large cap IPO in the first half of the year – the other 30 occurred in the second half of 2020.”

Large cap stocks had 31 new listings, raising an average of $148.65 million. 43 were small caps which was a decline compared to the 28 listed in 2019 – both years were below the five-year average of 54.

“At the top end, there were three new entrants with a market capitalisation on listing in excess of $1 billion compared to just the one in 2019,” Ohm said.

“The largest of these was Dalrymple Bay Infrastructure which raised $1.29 billion before listing in December; this represents a quarter – or 25.8% – of total funds raised across all IPO activity throughout the year.”

A total of 15 different industry sectors were represented with materials contributing 32% and retail had seven new offers, compared to one the previous year.

“Retail listings accounted for 13% of total funds raised across all sectors. The sector was positively influenced by those businesses which performed well in a COVID-19 environment, including Adore Beauty, Booktopia Group and Dusk Group, all of which listed in the final quarter of the year,” Ohm said.

“Share price performance was positive overall for new entrants following challenging early market conditions and many also recording strong year-end gains.

“A total of 49 of the 74 new entrants during 2020 posted a year-end gain, with the average gain being 34%.

“In all, 24% of all new listings recorded a gain of 50% or more for the year. While this is an excellent outcome for these companies, the gains are in line with the performance of the wider market in the second half of the year following the market low of early March.”

Currently, 14 companies had applied for listing at year-end, representing a small increase on the comparable period last year.

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