THE number of businesses listing on the Australian sharemarket nearly doubled last financial year, with the resources sector leading the charge.
THE number of businesses listing on the Australian sharemarket nearly doubled last financial year, with the resources sector leading the charge.
But the floats of rail operator QR National and Westfield Trust eclipsed funds raised by other businesses, disguising an otherwise weak initial public offering market.
A Deloitte Corporate Finance survey shows that the value of funds raised in floats jumped to $7.6 billion in the last financial year, compared with $4 billion the year before.
QR National and Westfield Trust generated $4.05 billion and $2.01 billion respectively.
Deloitte Corporate Finance partner Steve Woosnam said the listing of QR National had raised hopes for the IPO market, but the market overall failed to meet expectations.
''The equity market simply couldn't match the valuation expectations of vendors or those achieved through private sales,'' he said.
In total, 123 businesses were floated on the sharemarket compared with 63 the previous year, down from 221 in 2007.
Western Australia accounted for 63 IPOs. There were 13 in Victoria and 26 in New South Wales.
The resources sector produced 95 floats, almost 80 per cent of the total.
Fortis Mining, which listed at 20? a share in December, was the best performer. It raised $3.5 million to fund gold and base metals exploration in WA. The shares climbed 575 per cent after the company acquired potash interests in Kazakhstan.
Platypus Asset Management portfolio manager Prasad Patkar said investors were willing to take risks on resources stocks but other sectors remained weak. ''Commodity prices are the only source of optimism,'' he said.
Mr Patkar said ''macro uncertainties'', including European debt problems and a struggling US economy, had dampened investors' enthusiasm. ''All those issues are weighing down on the risk appetite in general,'' he said.
Mr Patkar said the pipeline was full of companies waiting for the opportunity to float.
''I don't think the market's all that strong to be honest.
''I think there were a lot of floats which have struggled to come on,'' he said.
Frequently Asked Questions about this Article…
How many businesses listed on the Australian sharemarket last financial year and how does that compare to prior years?
The number of listings nearly doubled to 123 last financial year, up from 63 the year before. That level is down from the boom year of 221 listings in 2007.
How much money did Australian IPOs raise last financial year?
IPOs raised about $7.6 billion in total last financial year, up from roughly $4.0 billion the previous year.
Which IPOs dominated the funds raised and why does that matter for the market?
Two floats — QR National and Westfield Trust — generated the bulk of proceeds, raising about $4.05 billion and $2.01 billion respectively. Those large deals disguised a generally weak IPO market because most other floats raised far smaller amounts.
Which sectors and Australian states led IPO activity?
The resources sector led by far, producing 95 floats — almost 80% of the total. By state, Western Australia accounted for 63 IPOs, New South Wales for 26 and Victoria for 13.
Why did commentators say the IPO market failed to meet expectations?
Deloitte partner Steve Woosnam said the equity market couldn’t match vendors’ valuation expectations or prices seen in private sales. Portfolio manager Prasad Patkar added that macro uncertainties — like European debt problems and a weak US economy — dampened investor risk appetite.
Which IPO was the best performer and what drove its strong return?
Fortis Mining was the stand-out performer. It raised $3.5 million for gold and base metals exploration in WA and its shares climbed about 575% after the company acquired potash interests in Kazakhstan.
Are investors still willing to back IPOs outside the resources sector?
According to commentary in the article, investors were mainly willing to take risks on resources stocks while other sectors remained weak. Commodity prices were cited as the main source of optimism for IPO interest.
What does a full pipeline of companies waiting to float mean for everyday investors considering IPOs?
A full pipeline suggests more IPO supply may be coming, but the market’s ability to absorb new listings is mixed. The article notes investors’ risk appetite is subdued and valuations have been hard to meet, so everyday investors should be aware that future floats may face the same challenges.
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