Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 393

Bounce back delivers super second-half for IPOs

This time last year, it would have been brave to have predicted that 2020 would be the best year for the global Initial Public Offerings (IPO) market since 2007, as the World Health Organisation declared COVID-19 a pandemic in March and the negative economic impacts played out.

Yet global IPOs were up 62% year-on-year by capital raised – at US$333 billion – and up 21% by number of listings at 1,615 (Source: Dealogic).

However, it was a tale of two halves: the fiscal and monetary stimulus bolstered market sentiment in the second half of the year and many companies, particularly in the technology and healthcare sectors, benefited from a quickly-transformed world.

This boosted IPOs globally, as market volatility reduced from extreme levels. Three quarters of the year’s IPO proceeds were raised in the second half, equating to more than the total raised in all of 2019.

The world’s two largest economies hosted the largest IPOs of the year with the top five companies raising around US$4 billion each:

  • Beijing-Shanghai High Speed Railway and JD Health in China
  • Snowflake, Airbnb, and Pershing Square Tontine in the US. The latter was the largest-ever listing of a special-purpose acquisition company (SPAC).

Strong year for new listings across multiple sectors

[Upcoming Floats and Listings has information on latest IPO and recently-listed companies.]

ASX experienced a similar pattern to the global trend. The number of new listings increased 23% year-on-year to 113, three quarters of which arrived in the second half.

IPO capital raised was down 23% at $5.3 billion, but the market value of new listings, including IPOs, spin-offs, direct and dual listings, was up 148% year-on-year at $35.7 billion.

Four of the largest new listings of 2020 were not IPOs, but important additions to the menu of investment opportunities available on ASX, including:

  • TPG Telecom’s (ASX:TPG) $16 billion merger with Vodafone Hutchison Australia and the listing of TPG Telecom as the combined group.
  • Iluka Resources’ (ASX:ILU) $2.3 billion demerger of its iron-ore royalties business, Deterra Royalties.
  • Magellan Global Fund’s (ASX:MGF) $2.3 billion listing of closed class units.
  • GrainCorp’s (ASX:GNC) billion-dollar spin-off of United Malt Group (ASX:UMG).

There were IPOs in a broad range of sectors; 10 out of 11 sectors in the Global Industry Classification Standard (GICS) were represented.

The top three by number were materials (31), technology (19) and healthcare (13).

Price performance of ASX IPOs (+33.4%) significantly outperformed the broader S&P/ASX 200 index (-1.45%) in 2020, with metals & mining IPOs achieving average gains of over 50%.

Top 10 IPOs in 2020 by capital raised

Ticker

Company

GICS Industry

Capital raised $m

Market cap at
Listing $m

DBI

Dalrymple Bay Infrastructure Ltd

Transportation Infrastructure

1,286

1,286

NXL

Nuix Ltd

Software

953

1,685

LFG

Liberty Financial Group

Diversified Financial Services

321

1,822

HDN

HomeCo Daily Needs REIT

Real Estate Investment Trusts

301

644

ABY

Adore Beauty Group Ltd

Internet & Direct Marketing Retail

269

635

UNI

Universal Store Holdings Ltd

Specialty Retail

148

278

MGH

MAAS Group Holdings Ltd

Construction & Engineering

146

530

CSX

CleanSpace Holdings Ltd

Health Care Equipment & Supplies

131

340

DOC

Doctor Care Anywhere Group Plc

Health Care Technology

102

255

HPG

HiPages Group Holdings Ltd

Interactive Media & Services

100

319

Source: ASX

Metals and mining

A strong upward price trend in several commodities led to a flurry of IPOs by mining explorers, including those with gold, silver and copper assets. Gold and silver prices were driven by demand from investors seeking a store of wealth and a hedge against inflation risk, with interest rates falling to record lows and a weakening US dollar.

Traditionally, copper prices move in the opposite direction to gold given 'Doctor Copper' is driven by industrial activity and economic growth, whereas gold tends to be a safe haven in times of uncertainty.

However, in 2020, copper prices also increased, driven by demand from China as economic activity normalised faster than expected, an anticipated increase in the production of electric vehicles and renewable energy, and supply disruptions.

In mergers and acquisitions activity, SSR Mining (ASX:SSR) – a TSX and Nasdaq listed Canadian gold, silver, zinc and tin producer – listed on ASX through its $470 million merger with Alacer Gold.

Australian Strategic Materials (ASX:ASM), a materials technology company focused on producing high-tech metals and oxides, listed following a demerger from Alkane Resources.

Technology

The technology sector benefited from, and adapted well to, a global population in lockdowns or working from home. The COVID-19 crisis brought forward years of change in the way consumers and businesses use technology, from accounting and e-commerce to online communications and entertainment.

It followed that investors backed business models with high scalability, compared to more traditional companies that generate profits from fixed assets, demonstrated by software, fintech, and e-commerce IPOs on ASX.

Investigative analytics and intelligence software company Nuix (ASX:NXL) was ASX’s largest-ever software IPO, raising nearly $1 billion and trading up 55% following its December listing. Macquarie Group’s venture-capital arm had backed the business since 2011.

PlaySide Studios (ASX:PLY) was the first Australian games developer to list on ASX; it achieved aftermarket price performance of 130% within two weeks of listing.

Three non-bank lenders came to market, the latest to challenge incumbent institutions, including Liberty Financial Group (ASX:LFG), Plenti Group (ASX:PLT) and NZ-based Harmoney (ASX:HMY)

Companies with variations on the BNPL (buy-now, pay-later) business model hit the boards, including Payright (ASX:PYR), NZ-based Laybuy (ASX:LBY), and US-based Zebit Inc. (ASX:ZBT).

Associated with these companies was the dramatic movement of consumers towards online channels, reflected in IPOs of e-commerce companies Adore Beauty Group (ASX:ABY), MyDeal.com.au (ASX:MYD), Cettire (ASX:CTT), Booktopia Group (ASX: BKG) and Cashrewards (ASX:CRW), as well as online tradie marketplace Hipages Group Holdings (ASX:HPG).

The S&P/ASX All Technology index, launched in 2020, was up 45.3% on a calendar-year basis. Now with a market capitalisation of over $170 billion and 69 constituents, expect the index to expand further as more technology IPOs come to market and existing listings grow in size to meet eligibility criteria.

Healthcare

The COVID-19 crisis broadly raised awareness of the importance of healthcare, benefiting the sector from an investment perspective, but also benefiting some healthcare companies directly.

This was borne out in the IPOs of CleanSpace Holdings (ASX:CSX) , a manufacturer of respiratory protection equipment; and Global Health Investment Fund-backed Atomo Diagnostics (ASX:AT1), which offers diagnostic test solutions including for COVID-19 screening. Both companies gained around 50% in the aftermarket (from their issue price).

Other IPO highlights included: NZ-based soft-tissue regeneration business Aroa Biosurgery (ASX:ARX), backed by venture-capital firm Movac; and UK-based telehealth company Doctor Care Anywhere (ASX:DOC), with the telehealth industry expected to expand rapidly over the coming years.

Secondary offerings at highest level in a decade

In the five years prior to 2020, the ASX averaged around $40 billion a year in secondary offerings. That is, the sale of new shares by a company that has already had an IPO.

Incredibly, $66 billion was raised in 2020 – the largest amount in over a decade – as many companies shored up balance sheets during the crisis and companies in higher-growth sectors, like technology, raised capital to accelerate growth initiatives.

In global terms, ASX ranked fifth by secondary capital raised and first by number of deals out of over 90 exchanges (Dealogic).

Source: Dealogic, 1 January to 31 December 2020; values in brackets show capital raised in US dollars. ^Includes placements, SPPs, rights issues. Excludes block trades, convertibles, DRPs, employee share schemes; value apportioned by exchange where applicable.

 

James Posnett is Senior Manager, Listings, at the ASX. This article is general information and does not consider the circumstances of any investor. This article will also appear in the ‘ASX Investor Update’ on Friday.

 

RELATED ARTICLES

IPO a-go-go: the who, why, when and how much of IPO investing

The future has arrived in Australia

Inside a hot IPO

banner

Most viewed in recent weeks

House prices surge but falls are common and coming

We tend to forget that house prices often fall. Direct lending controls are more effective than rate rises because macroprudential limits affect the volume of money for housing leaving business rates untouched.

Survey responses on pension eligibility for wealthy homeowners

The survey drew a fantastic 2,000 responses with over 1,000 comments and polar opposite views on what is good policy. Do most people believe the home should be in the age pension asset test, and what do they say?

100 Aussies: five charts on who earns, pays and owns

Any policy decision needs to recognise who is affected by a change. It pays to check the data on who pays taxes, who owns assets and who earns the income to ensure an equitable and efficient outcome.

Three good comments from the pension asset test article

With articles on the pensions assets test read about 40,000 times, 3,500 survey responses and thousands of comments, there was a lot of great reader participation. A few comments added extra insights.

The sorry saga of housing affordability and ownership

It is hard to think of any area of widespread public concern where the same policies have been pursued for so long, in the face of such incontrovertible evidence that they have failed to achieve their objectives.

Two strong themes and companies that will benefit

There are reasons to believe inflation will stay under control, and although we may see a slowing in the global economy, two companies should benefit from the themes of 'Stable Compounders' and 'Structural Winners'.

Latest Updates

Retirement

Stop treating the family home as a retirement sacred cow

The way home ownership relates to retirement income is rated a 'D', as in Distortion, Decumulation and Denial. For many, their home is their largest asset but it's least likely to be used for retirement income.

Property

Hey boomer, first home buyers and all the fuss

What is APRA worried about? Most mortgagees can easily absorb increases in interest rates without posing a systemic threat to the banking system. Housing lending is a relatively risk-free activity for banks.

Property

Residential Property Survey Q3 2021

Housing market sentiment has eased from record highs and confidence has ticked down as house price rises slow. Construction costs overtook lack of development sites as the biggest impediment for new housing.

Investment strategies

Personal finance is 80% personal and 20% finance

Understanding your own biases and behaviours is even more important than learning about markets. Overcome four major cognitive biases that may be sabotaging your investing and recognise them in others.

Where do stockmarket returns come from over time?

Cash flow statements differ from income statements and balance sheets, and every company must balance payments to investors versus investing into the business. Cash flows drive the value of the business.

Fixed interest

How to invest in the ‘reopening of Australia’ in bonds

As Sydney and Melbourne emerge from lockdown, there are some reopening trades in the Australian credit market which 'sophisticated' investors should consider as part of their fixed income portfolios.

Shares

10 trends reshaping the future of emerging markets

Demand for air travel, China’s growing middle-class population, Brazil’s digital payments take-up, Indian IPOs, and increased urbanisation are just some of the trends being seen in emerging economies.

Sponsors

Alliances

© 2021 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.