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IPO market to finish 2020 strongly

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MEDIA RELEASE: Despite the widespread economic impact of COVID-19, the Australian IPO market rebounded strongly in the second half of 2020 with a resurgence in market listings, according to the latest HLB Mann Judd IPO Watch Australia Report.

The report analyses IPO activity over the past 12 months on a number of key metrics, including listing volumes, share price performance, industry spread and overall trends, as well as a review of the pipeline for 2021.

There were 74 new listings on the ASX in 2020, which is an increase of 12 on the year prior. Notably, the second half of 2020 recorded 84 per cent of the year’s total listings.

According to author of the report and partner at HLB Mann Judd Perth, Marcus Ohm, the strong end to the year reflects 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. 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,” he said.

Total funds raised for the year were $4.98 billion, a significant reduction on previous years with $6.91 billion and $8.44 billion raised in 2019 and 2018 respectively.

“The fall in volumes impacted on total funds raised with the first half of the year total of $132 million representing just 3 per cent of the total funds raised for the year. The largest amount raised during the first quarter was $30 million by Atomo Diagnostics (ASX: AT1) which was also the only large cap IPO in the first half of the year – the other 31 occurred in the second half of 2020,” said Mr Ohm.

Listings of large cap stocks – those in excess of $100 million market capitalisation – performed well with 31 new listings which was comparable to the previous year and above the five-year average of 29 listings. On average, large cap listings raised $148.65 million.

“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.

‘The largest of these was Dalrymple Bay Infrastructure (ASX: DBI) which raised $1.29 billion before listing in December; this represents a quarter – or 25.8 per cent – of total funds raised across all IPO activity throughout the year,” he said.

In terms of small cap listings – or those companies with a starting market capitalisation of less than $100 million – there was a total of 43 new market entrants. This was an improvement on the 28 recorded in 2019 but below the five-year average of 54.

A total of 15 different industry sectors recorded listings in 2020, with Materials companies contributing 32 per cent of all listings and Retailing also well represented with seven new listings, up from one in 2019.

“Retail listings accounted for 13 per cent 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 (ASX: ABY), Booktopia Group (ASX: BKG) and Dusk Group (ASX: DSK), all of which listed in the final quarter of the year.

“There was a small decline in the number of listings from the Software & Services sector with nine listings compared to the 12 listings the year prior. Four of these listings were large caps and raised an average of $292.5 million.

“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 per cent.

“In all, 24 per cent of all new listings recorded a gain of 50 per cent 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.”

Mr Ohm said the strong end to the year also looks set to continue throughout 2021, with a healthy pipeline of new market entrants scheduled to list. Currently, 14 companies have applied for listing at year-end, representing a small increase on the comparable period last year.

“These companies are seeking a total of $172 million which is a substantial increase on the $111 million sought at the same time last year. There’s also a notable spread across sectors, with nine sectors represented.

“It is telling that in a post-COVID-19 recovery environment, the pipeline is quite good compared to previous years, and this reflects the strength of Australia’s economic fundamentals and positive investor sentiment,” he said.

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