Marcus Ohm
There was a marked deterioration in the initial public offering (IPO) market in 2023, with just 32 listings for the whole year, according to the latest HLB Mann Judd IPO Watch Australia Report. This was lowest number of annual listings yet measured by the report since it started in 2004.
The 2023 level was 63 per cent lower than the 87 listings in 2022 and 83 per cent lower than the record-breaking number of 191 IPOs in 2021.
There were just 14 listings in the first six months to June 2023 and a further 18 in the second half of the year. January recorded the highest number of floats, with six listings. The total funds raised for the year were $847 million, reflecting a 21 per cent fall compared to 2022 when the total funds raised were $1.07 billion. Last year was the first time since 2012 where the total amounts raised in ASX listings did not exceed $1 billion.
Marcus Ohm, author of the report and partner at HLB Mann Judd Perth, says the slowdown of listings started in the second half of 2022 and continued throughout 2023.
“The macroeconomic and geopolitical environment both in Australia and across the globe, including high inflation and rising capital costs, presented significant challenges for most companies seeking to list.
“These challenging conditions, combined with poor investor sentiment throughout 2023, meant that an IPO listing was not an attractive or viable option for many companies during the year,” Mr Ohm said.
Continuing the trend of the past few years, Western Australia recorded the highest number of listings, with 15 listings, of which all were from the Materials sector. South Australia failed to register a listing in 2023 despite having at least one new listing every year for the past 15 years.
The resources sector (representing both the Energy and Materials sectors) dominated the IPO market. The Materials sector contributed 23 listings, accounting for 72 per cent of all new listings in the year. In 2022, Materials also made up 72 per cent of all new listings.
Mr Ohm said that the current pipeline of listings remains very subdued with many businesses waiting for an improvement in economic conditions before making a decision to list.
At the time of writing, only five upcoming floats were registered with the ASX. The highest amount being sought was just $10 million, indicating that the IPO market will continue to remain subdued in coming months until there are significant changes in the macroeconomic and geopolitical environment.
“The environment is likely to remain tough for companies in all industries, including the resources sector, particularly if the RBA continues to raise interest rates. However, if the gold price remains above the US$2000 level, or lithium goes on a run, this might act as a catalyst for greater interest in the junior explorers and a higher level of IPO activity overall.”
In terms of price action, a total of 18 listings on the ASX experienced a first-day gain, with an average gain across all new listings of 6 per cent, down from a 16 per cent gain in 2022. Reflecting the tough market conditions, however, only 11 were able to maintain their listing price or move higher by the year’s end. As at 31 December 2023, the average loss across all listings against IPO price was 10 per cent. This represents a larger loss compared to 2022, where a year-end loss for IPOs of 2 per cent was recorded.
Of the 32 listings in 2023, there were seven large cap listings (companies with a market capitalisation over $100 million) representing 22 per cent of the total listings. By comparison, of the 87 listings in 2022 there were 9 large listings, representing 10 per cent of total listings.
“Large cap listings contributed 76 per cent of the total funds raised in the year. On average, each large cap raised $92.5 million, with Redox Limited (ASX: RDX) securing the largest amount of $402 million,” Mr Ohm said.
In the small-cap market (companies with a market capitalisation of $100 million or less), the $10 million to $25 million band raised the highest amount of funds, reaching $68.39 million. This represented 8 per cent of the total amounts raised during the year.
On a positive note, 29 of the 32 listings were able to raise their subscription target amount. This represented 91 per cent of all listings and an increase from 70 per cent in 2022, the report reveals.
Listings in the $50 million to $75 million market cap band recorded the best share price performance, with the first-day loss against the IPO issue price of 10 per cent, increasing to a year-end gain of 29 per cent, delivering a healthy return to investors.
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