While the number of IPOs in 2019 was down on the previous year, listings overall performed better than in 2018.
The latest HLB Mann Judd IPO Watch report indicates there were 62 new listings on the ASX in 2019, down from 93 the year prior. The year’s IPO activity was a return to the levels seen between 2012 and 2015, when the average was 61 new listings a year.
The fall in listings in 2019 resulted in a decrease in total funds raised during the year compared to previous year. In 2019, $6.91 billion was raised, down 18 per cent on 2018 when $8.44 billion was raised.
The total funds raised was also affected by the fall in the number of very large companies listing, with the largest capital raising in 2019 achieved by Tyro Payments (ASX: TYR) achieving $925 million. In contrast, in 2018 there were a number of $1 billion-plus companies listing, and the three largest IPOs of the year raised $4.75 billion between them.
Despite the drop in the number of IPOs and the total funds raised, there was an increase in the average amount raised and also an improvement in subscription rates; the average amount raised in 2019 was $112 million, up from $91 million in 2018, reflecting the fact that there were fewer small cap listings over the past 12 months.
There was a significant reduction in the number of small cap IPOs in 2019 – just 28 compared to 72 in 2018, reflecting a ‘move to the middle’, or fewer listings at both the very small and the very large ends of the market.
Small cap companies made up just five per cent of the total funds raised, and 45 per cent of all new listings, compared to a five-year average of 66 per cent. The IPO Watch Report cited the materials sector as the main driver of this decline, with only four listings – compared with 15 – recorded for the corresponding prior period.
While the year was notable for the number of IPOs that were shelved or withdrawn, those that did list performed well. The pulled float by Latitude Financial, and others including Retail Zoo and Onsite Rental Group, highlighted some of the challenges of going public, but overall in 2019, new entrants performed well, particularly compared to the previous year.
The average year-end gain across all companies was 34 per cent, and the average first day gain was 24 per cent.
Looking ahead, the pipeline for IPOs is somewhat subdued, with only 13 companies applying for listing to the ASX at the start of 2020, down from 17 the year before, and significantly down from 37 at the start of 2018.
Materials stocks make up the majority of the proposed listings (six), and notably there are no proposed IPOs of any significant size. The pipeline is soft, reflecting the challenging conditions in the IPO market.