Last year’s initial public offerings failed to produce returns for investors – falling from their issue prices by an average of 18 per cent by year end. It was the worst performance for IPOs on the ASX since 2011.
Only 20 of the 93 companies listed on the ASX in 2018 ended the year above issue price, according to HLB Mann Judd’s IPO Watch Report.
Large IPOs (over $100 million) were the worst performing, with an average year end price fall of 27 per cent. The small cap sector dominated IPO entries and performed well with 55 of the 72 successful in meeting their capital goals.
Marcus Ohm, HLB Mann Judd partner and author of the report, explained that this is the only time in recent history that a loss has been made on year end performance for IPOs.
The floats underperformed on their first day with share prices gaining just five per cent.
“Only 47 listings ended their first day above their listing price, a rather poor result given that the issue price of these IPOs was typically discounted,” he said.
The underwhelming performance is reflective of the wider overall market and the high risk that the new IPOs present.
“Companies considering listing will need to clearly articulate their offerings and provide sound investor communication,” Ohm said.
The total funds raised in IPOs in 2018 reached $8.44 billion, which is an increase of 106 per cent on the 2017 funding.
The increase in funding came from the three largest IPOs of the year – Viva Energy Group, Coronado Global Resources Inc and L1 Long Short Fund Limited, which raised $4.75 billion between them for 64 per cent of the total.
Despite the increase in funding, several new entrants struggled to raise capital throughout the year as only 72 per cent of new listings met their targets. This is a decrease on the 79 per cent and 83 per cent of targets met in 2017 and 2016 respectively.
The materials sector recorded 35 listings, which is a sharp increase compared to the 2017 listings of only 29.
“Materials stocks made up the majority of proposed listings with seven listings, showing market sentiment still remains for this sector.”
The pipeline is soft for IPOs on the Australian Stock Exchange after a slow end of the year. There are only 17 upcoming floats this year, down on the 37 that had applied to the ASX at the same time last year.