Rebounding performance not continuous in 2019
Although the S&P/ASX 200 index recently reached above 6,300 point, its highest level since December 2007, there are signs that the Australian primary equity market is slowing down. While 2018 recorded the highest Australia-listed ECM volume in three years , it has since fallen to $4.6bn via 196 deals this YTD, a 42% decrease in volume and a 22% decrease in activity compared to the same period of 2018.
With the exception of a slight uptick last year, Australia’s downward trend in IPO volume which begun in 2014, looks set to continue. With $230.1m raised via 11 deals so far this year, this represents a 42% and 54% decrease in volume and activity compared to the same period last year. These are the lowest year-to-date figures since 2014. The biggest IPO so far this year is US-based technology company Life360 Inc’s $104m offering in April.
Bad performance in mining sector
Mining is usually one of most prominent sectors in Australia. In 2018 alone, 31 companies from this sector successfully listed on the Australian Securities Exchange through IPO, contributing to 29% of the total IPO volume and 41% of the activity for that year. However, the sector has taken a turn for the worst in 2019. So far, only 2 companies from the mining sector have completed an IPO, with $7.8m raised between them. In the same period of 2018, 13 companies raised $244.1m.
The aftermarket performance of the mining sector has also taken a hit. 26 out of the 33 mining companies listed since 2018 are now trading underwater, with one company trading 88% below their offer price. This unimpressive aftermarket performance may reduce investor confidence in the mining sector’s IPO prospects. Additionally, with an uncertain market condition and the trade dispute between China and US, mining companies may have second thoughts before they apply to list.
– Written by Vincent Li
Data source: Dealogic, as of May 10, 2019