Australian IPO Markets
CY2014 was the most active year for initial public offerings (IPO’s) over the last 10 years, with more than A$15 billion being raised across 69 IPO’s. Whilst the number of new floats was less than peaks in 2007 and 2010, this decline is largely explained by the downturn across the mining industry, which has also affected the materials sector listings. The Medibank IPO was the largest float in CY2014, with the healthcare and training and education sectors also being significant contributors to the activity.
A hot end to CY2014
The IPO market in CY2014 ended with an abundance of activity on the back of the Medibank float. There were 14 IPOs in November and December with total capital raised of $5.8 billion. Other key listings in late 2014 included Ashley Services Group ($98.7 million (note: PKF Lawler Corporate Finance acted as lead advisers for that IPO)), oOh!Media Limited ($167 million), SurfStitch Group Limited ($83 million), Godfreys Group Limited ($78 million) and Estia Health Limited and Pacific Smiles Group Limited ($42 million). The latter half of CY2014 provided the first sustained IPO opening for some time as a function of:
- an abundance of global capital seeking increased yields through investment in equities;
- momentum from other successfully completed IPOs;
- reported earnings for listed businesses continuing to improve;
- the ability to create a liquidity event for shareholders and access capital to fund
- growth and acquisitions; and
- Private Equity requirement for exit.
The privatisation of key Australian and New Zealand government assets is a key driver of the increase in the capital raised following the global financial crisis, including the Medibank Private Limited: ($3.3 billion of $15 billion in CY2014) and QR National (Aurizon) ($2.7 billion of $5.6 billion in CY2010).
Size of Listing (Market Cap)
There was a diverse spread of IPOs by capital raised CY2014, with 32 of 69 floats being less than $50 million, 41 less than $100 million, and 62 less than $500 million. Broken down this means:
- there is market demand for smaller companies (market capitalisation less than $100 million) to operate in the public environment;
- vendors in the smaller companies have had to retain a greater stake in the company post IPO which reflects:
– a risk premium for smaller companies which relates to factors which may include an increased reliance on key people, and reduced diversification of business operations;
– ensures that vendor and new investors interests are aligned; and
– potentially vendors wishing to retain equity for the next stage of growth.
For more information on IPO activity in CY2014 please contact one of our Corporate Finance specialists from around Australia