Strong IPO pipelines for the new financial year and the ASX’s largest float since 2018
Observers of Initial Public Offerings (IPO) wondered what 2021 would bring after a rush of companies listed on the Australian Securities Exchange in the fourth quarter of 2020. Would strong growth continue or would the IPO market slow?
The answer: healthy IPO momentum persisted in the first half of 2021, at a slightly more civilised pace, as economic conditions and investor interest remained strong.
In the first six months of 2021, 85 companies joined the ASX board, raising $3.5 billion of capital and listing with a combined market capitalisation of $22.8 billion.
This article examines the composition of these new listings, compares ASX to global peers on IPOs this calendar year-to-date, and considers the outlook for the rest of 2021.
Strong first half for mining
Nearly half of listings in the first half of 2021 came from the resources sector. These listings collectively raised more than $650 million. Buoyed by continued strength in commodity prices and investor sentiment, many listings involved mining exploration companies that capitalised on favourable conditions.
The largest raising and value listed within the mining sector was the March listing of mineral drilling contractor, DDH1 (ASX: DDH). It raised $150 million and had a market capitalisation of $375 million at listing.
Diverse listings in financials, healthcare and technology
The largest ASX capital raising in the first half of 2021 was $500 million by non-bank lender, Pepper Money (ASX: PPM) at the end of May. The ASX-listed Fintech sector comprises a broad, fast-growing cohort of companies, led by the BNPL (Buy-Now-Pay-Later) sector and other non-traditional finance platforms.
Another fintech listing, Latitude Financial (ASX: LFS), listed in April after raising $200 million.
The broader technology sector was buoyed by the high-profile listing of Airtasker (ASX: ART) through an $84-million capital raising. Airtasker ended June up 69 per cent (compared to its offer price) and was up as much as 169 per cent two days after its IPO. Airtasker entered the S&P/ASX All Technology Index before the financial-year end.
There were eight healthcare listings. Australian Clinical Labs (ASX: ACL), a private hospital pathology business, raised more than $400 million. As the largest healthcare capital raising on ASX in over six years, the Australian Clinical Labs IPO reinforced the strong investor interest in ASX-listed life sciences and healthcare companies.
In spite of international border closures, ASX attracted overseas companies looking to capitalise on the investor appetite, attractive valuations and deep superannuation pool available for growth companies. Australia boasts the world’s fifth largest pool of pension fund assets.
The largest international listing for ASX in the first half was New Zealand specialist chemical company, DGL Group (ASX: DGL), which raised $100 million.
To the end of June, 10 international companies from six countries – with a combined market capitalisation of $3.7 billion – listed on ASX.
A notable US listing was Chicago-based online education business, Keypath Education International (ASX: KED). It listed at the start of June.
In June, Woolworths divested the drinks and hotels business, Endeavour Group (ASX: EDV). It was the largest listing by market capitalisation in the first half, at $11.1 billion.
ASX welcomed the first Listed Investment Company (LIC) IPO listing since the COVID-19 pandemic began: Salter Brothers Emerging Companies (ASX: SB2), which raised $20 million.
In June, Wilson Asset Management listed WAM Strategic Value (ASX: WAR), another LIC, raising $225 million.
Global equities continued an impressive comeback from the sharemarket turmoil in March 2020, extending gains through the first half of 2021.
In Australia, the S&P/ASX 200 Index broke records, surpassing 7,400 points in June. The index returned 11% for the period, in line with other global markets.
In new-listing volumes, ASX ranked fifth globally, behind only the US and Chinese markets in the first half of 2021 (Dealogic data).
Hong Kong had the largest listing of the period, by capital raised and market capitalisation. This was the Chinese video-streaming technology company and Tik Toc rival, Kuaishou Technology. It listed with a market capitalisation of more than $80 billion.
Chinese listings dominated the first half of 2021, comprising half of the top 10 listings globally. Other companies listing on the NYSE and Hong Kong exchanges included ride-share provider DiDi Global, and e-commerce platform JD Logistics.
In the US, a recent trend was reversed in the second-quarter of 2021 as traditional IPOs outnumbered the volume and value of Special Purpose Acquisition Companies (SPAC) listings for the first time since the second quarter of 2020 (Source Dealogic).
It will be interesting if this pattern continues through the rest of 2021, as many recent SPAC listings look to cement acquisitions and provide investor returns.
Second-half IPO outlook
The end of June marks the end of the financial year in Australia. The tax year 2020/21 resulted in 176 new listings on ASX – the most in a financial year since 2007/08. This further demonstrates the strength of the sharemarket recovery from March 2020, and the investor appetite for new listings.
The New Financial Year has begun with the largest ASX float since 2018. PEXA Group (ASX: PXA), the electronic-conveyancing platform, raised $1.75 billion and listed with a market capitalisation of more than $3 billion.
Interest in mining IPOs, and international interest in ASX IPOs generally, continue to thrive. This was shown by the listing of NexGen Energy (ASX: NXG), which had a market capitalisation of $2.5bn in early July. NexGen is Canadian uranium mining developer already listed on the Toronto and New York stock exchanges.
The listing of local copper producer, 29Metals (ASX: 29M), which raised more than $500 million, further added to mining IPO sentiment.
Both IPOs reinforce the optimism in the mining sector and justify ASX’s reputation as the global home for resource listings.
Provided market sentiment and economic conditions remain favourable, the pipeline of new listings suggests another busy time when the IPO window re-opens after the reporting season (in August) and we move towards the end of the calendar year.
This includes continued momentum in the mining sector, and key listings from Australian and international companies in strategic sectors, such as technology and healthcare.
Kate Galpin is the Business Development Manager, Listings for The Australian Securities Exchange (ASX), www2.asx.com.au.