The challenging economic environment continues to weigh heavily on the market for initial public offerings (IPOs) so far in 2024, with higher interest rates and persistent inflation restricting listing activity, according to the latest HLB Mann Judd IPO Watch Australia Mid-Year Report.
There have been just 13 listings in the first six months to June 2024, one fewer than in the same period last year. This follows a lacklustre year for IPOs in 2023, when the total funds raised from ASX listings was $847 million, the first time since 2012 where the total amounts raised did not exceed $1 billion.
Marcus Ohm, author of the report and partner at HLB Mann Judd Perth, said while the number of listings was down compared to the first half of 2023, the good news was that the capital raised was much higher than the first half of 2023, and almost the same as the full 2023 year due to the presence of two larger listings during the period.
“Total funds raised in the first six months of 2024 were $809.5 million, an increase of 440 per cent compared to the same period last year ($149.9 million). While there were only three large-cap listings during the first half of 2024, this included two companies with a market capitalisation exceeding $1 billion at listing, which contributed $660.1 million in total funds raised,” he said.
Materials company Metals Acquisition Limited (ASX: MAC) was the first big listing of the year in February, raising a total of $325 million. That was followed by the June listing of Mexican-themed restaurant chain Guzman y Gomez Limited (ASX: GYG), when $335 million was raised from investors.
According to Mr Ohm, looking ahead, uncertainty persists regarding a recovery in the IPO market. However, there are positive signs, with the two large IPOs of the period being fully or oversubscribed, highlighting that there is investor appetite for the right listing on the ASX.
“Both Metals Acquisition and Guzman y Gomez were popular with investors, and both performed well on their first day. More generally, the share price performance of new listings during the period was an improvement on the previous year.
“The average first day gain across all new listings was 32 per cent for the first six months of 2024, compared to the average first day gain of just 6 per cent for the full 12 months of 2023. By the end of June 2024, the average increase over the listing price was 13 per cent, compared to an average year-end loss in 2023 of 10 per cent,” Mr Ohm said.
“New IPOs performed well relative to the wider share market, with the ASX All Ordinaries closing just above 8,013 at the end of the period, representing a 2 per cent increase for the period. IPOs performed much better, indicating a positive investor appetite for new listings,” he said.
“However, the extent of any wider recovery in the Australian IPO market remains to be seen, given current economic challenges and inflationary concerns,” Mr Ohm said.
“There are not yet any significant volumes in the near-term pipeline, with only four upcoming listings registered with the ASX (at the time of writing), three of which are Materials companies,” he said.
As of 30 June 2024, the four upcoming listings registered with the ASX were seeking $111 million in initial capital. This excludes Alcoa Corporation which is not raising any capital as part of its listing for the issue of CHESS Depositary Interests (CDIs), representing a share in Alcoa stock in the US.
During the first half of 2024, six industry sectors contributed new listings during the period, up from three sectors in the first half of 2023. Materials listings dominated, comprising seven of the thirteen listings in the period. The largest listing was in the Consumer Services sector with Guzman y Gomez, followed by the Materials company Metals Acquisition.
All six sectors recorded a first day gain on average. Both the Materials and Diversified Financials sectors recorded average first day gains of 40 per cent across all listings, followed by Consumer Services, with Guzman y Gomez up 36 per cent.
Breaking listings down by size, of the 13 listings in over the first half of 2024, most were small cap listings (companies with a market capitalisation of less than $100 million at the time of listing). Small cap listings raised $90.5 million across 10 listings during the period, contributing just 11 per cent of the total funds raised, in contrast to the first half of 2023, when small caps contributed 67 per cent of total funds raised.
The average amount raised per listing by small caps increased marginally to $9.05 million in 2024 compared to the average of $8.3 million in the first half of 2023, a 9 per cent increase.
