Small cap companies continued to provide the majority of initial public offering (IPO) activity in 2011, with an increased number listing during the year compared to the last three years.
However the funds raised were down on previous years, according to the latest HLB Mann Judd Small Cap IPO Watch – click here to read the report.
A total of 92 small cap companies listed over the 2011 year, up 10 percent on 2010 and 156 percent on 2009. Small cap listings represented 88 percent of all IPOs during the year (2010: 88 percent, 2009: 92 percent, 2008: 93 percent).
However the total amount raised by small cap companies was down 17 percent on 2010, and the average level of funds raised by small caps was the lowest for five years, even at the height of the global financial crisis. Small cap companies raised an average of just $6.84 million in 2011, compared to $9.07 million in 2010; $7.47 million in 2009; $7.45 million in 2008 and $8.75 million in 2007.
Mr Geoff Webster, author of the report and corporate finance director at HLB Mann Judd Melbourne, said that the decline in funds raised is a worrying sign of the ongoing challenges for listed companies and for corporate fund-raising generally.
“Coupled with the fact that 29 percent of 2011’s issues were undersubscribed, compared with 22 percent in 2010, it is concerning that the IPO market continues to struggle so badly.
“It is a further example of the difficulties businesses face in raising corporate finance and additional evidence of the challenging operating environment.
He also said that the start of 2012 looks set to continue the lack-lustre performance of the December 2011 quarter.
“The pipeline of upcoming IPOs is down from the same time last year, with only 26 ASX applications lodged seeking to raise a combined $122.2 million, compared to 34 companies seeking $321 million in January 2011. Significantly, only five companies have a proposed listing date.
“On the other hand, the Australian sharemarket has started 2012 positively, and if this continues it seems likely that more companies will consider an IPO later in the year,” Mr Webster said.
