2020 IPO Watch Mid-Year Report

IPO numbers halve

The number of IPOs in the first half of 2020 fell considerably in comparison to previous years. This was against the backdrop of a volatile period for the ASX overall. There have only been 12 new listings this year which is in marked contrast to 2019 which saw 23 new listings in the first half of the year and the five-year average of 34 listings.

The total amounts raised from new offerings also fell significantly. Only $132 million was raised over this period compared to $823 million raised over the same period in 2019 and $2.5 billion raised in the first six months of 2018. This was primarily due to the lack of large cap IPOs with only one new listing, Atomo Diagnostics Limited (ASX: AT1), that had a market capitalisation greater than $100 million upon listing.

Whilst the first half of the year historically experiences lower volumes of listings, it would appear that the COVID-19 pandemic had a significant impact on the IPO market.

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There were multiple listings which were subsequently withdrawn during the period amidst difficult market conditions. Market uncertainty and share price volatility do not generally provide a listing-friendly environment given the significant costs involved in undertaking an IPO. There were only three listings in the June quarter which raised a combined total of $44.5 million. These difficult market conditions are also reflected in the upcoming pipeline of activity with only one new listing noted at the end of June 2020.

Those listings which did occur were predominantly from the small cap sector (less than $100 million market capitalisation at listing). Interestingly, small cap listings remained consistent with the previous period with 11 new entrants. There was only one new large cap IPO during the period which raised $30 million. This was significantly less than the previous period where there were 10 new large cap listings raising a combined total of $663 million.

Unsurprisingly, there was a lack of diversification across industry sectors. Whilst materials and technology companies are often strong contributors to small cap volumes in more buoyant years, the first half of 2020 was very subdued. The Materials sector contributed only three new listings for the period. The first half of 2019 also only had three listings which at the time was a significant drop when compared to 2018 where there were 16 new listings. Software & Services also experienced a lack of activity with only two new listings.

The volatility present in the market was reflected in the share price performance for IPOs during the period. The average first day gain over listing price from all new entrants was 19% and the average gain by the end of June was 16%. Seven new entrants recorded first day gains and five companies recorded a gain over listing price for the half year period. In terms of share price growth post listing, this was significantly down from the 63% average gain noted in 2019 which was heavily impacted by a market
rebound in the first quarter.

In terms of subscription levels, 75% of the new listings were able to meet their target raising on average 96% of the total subscription funds sought (considering both over and under subscriptions).

This year’s report contains the following commentary:

  • IPO activity by quarter
  • Analysis by industry sector
  • IPO subscription rates and achieved targets
  • ASX market performance
  • An outlook for the remainder of the year.
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