Financial services listings go from boom to bust

Financial services companies have normally had a minor presence on the Australian Stock Exchange (ASX), but with a record number of groups listing last year, it seems 2000 was the year of arrival. Nicole Szollos looks into the financial services listing boom.

Results from the latest PricewaterhouseCoopers (PWC) survey of sharemarket floats, reveal a record number of financial services industry organisations listed on the Australian Stock Exchange (ASX) during the course of last year.

Out of 141 groups that went public, 18 were investment and financial services groups, according to ASX industry sector categorisation, up by seven from the previous year's numbers. The 18 groups included a range of companies, including planning dealer groups, software providers, agricultural investments and education suppliers.

Of that number, six were broking and dealer groups, one was a financial planning education group and one was a financial services media group.

Representing the broker and dealer groups were Harts Australasia, Beacon Financial Services, Fiducian Portfolio Services, Stockford and Count Financial. These groups were joined by online broker Sanford, Internet training group Worldschool and media group InvestorInfo.

The latter two have had a torrid few months, with the drop in tech stocks ravaging their published 'clicks and mortar' strategy, resulting in a drop in their share prices.

Worldschool purchased financial education provider Integratech in September last year and, at the time of writing, was trading at seven cents. This is down from its listing price of $1. At the same time, InvestorInfo was trading at 19 cents, compared to its offer price of 50 cents.

Aside from the record number of financial services companies listing in 2000, PricewaterhouseCoopers corporate finance and investment banking partner Greg Keys says the types of groups which listed reflects a change in business over the last few years.

"Previously, we have seen more investment funds, trusts and property groups, while last year the vast majority have been true financial service businesses," Keys says.

Corporate finance and investment banking director Michael Campbell confirms the trend.

"There were a number of companies which listed in 2000 that provide services in, and to, the financial services industry. This contrasts with the historical norm in previous years, which was for floats to be limited to various types of investment vehicles, such as investment funds and trusts," Campbell says.

Data included in the PWC floats survey is a market capitalisation figure from close of trading on the listing date, and a year end premium (absolute) figure calculated on December 31 based on the closing price of the stock.

PWC analysts reviewed movement between the two, and generated further data for the survey. Keys reports the survey figures show that on average the companies that floated last year could list up to five per cent over their prospectus' issue price.

Excluding investment and financial services floats, a significant proportion of companies that listed last year had small market capitalisation with a value of less than $100 million. According to the survey results, financial services groups returned a better overall share price performance than the small caps companies.

The median share price performance figure for the 18 investment and financial services floats was an absolute premium of -3.4 per cent, compared with -18.5 per cent for the small caps companies.

"The financial services groups have held their ground, with only marginally negative results," Keys says.

Within these eight financial services groups, half had positive end of year absolute premiums, while the other half returned negative results. Reasons for posting a negative figure range from general market limitations to more specific group structure and activities.

Last August, online financial services provider Sanford Limited listed on the ASX and ended the year with a PWC survey absolute premium figure of -45.3 per cent.

Sanford chief executive Steven Goh says the negative result can be attributed to the state of the general market.

Entering the market for the last four months of 2000 exposed the group to the Olympic period, and the late October/early November low period when people don't usually look at stocks so much, Goh says.

"If it [the general market] was any worse, you might have shut your doors," he says.

However, Goh is optimistic about the group's forecast and says Sanford expects to be cash flow positive this financial year.

Count Financial Group listed in the middle of last December, so with only 19 days trading on the ASX before the year's end, the 21.3 per cent absolute premium was partly based on the prospectus price.

Again, this group's result was affected by its time of listing. The group had been looking to float for several years but decided to delay its listing until late last year.

According to Count, this was due to the Y2K hype and impending changes with the introduction of the goods and services tax (GST), and the expected effects this would have on Count's proper authority holders.

"The stock is more stable. People bought for the long-term and those who wanted short-term profit, the stag, are already out," says Count Financial Group director Barry Lambert.