Investor confidence breaks IPO record
Strong market conditions allowed Australian companies to raise $23 billion in new equity in the half year to end 31 December last year, according to a KMPG Corporate Finance Survey.
Strong market conditions allowed Australian companies to raise $23 billion in new equity in the half year to end 31 December last year, according to a KMPG Corporate Finance Survey.
The amount raised in the six months nearly totalled that raised in the previous two full financial years with $29 billion raised in 1997-1998 and $27 billion in 1998-1999.
Floats accounted for more than half of the funds raised at $13.6 billion with $7 to $8 billion of that coming from the pockets of retail investors, the survey says.
The Telstra 2 offer attracted the lion's share of these funds, pulling in about $6 billion with much of the rest heading towards newly listed telecommunications and technology companies.
The other big winner was the emergence of income securities with six new issues totalling $4.6 billion for the six month period. These absorbed a large part of investors' funds which may have been diverted through to investment in new or existing stocks.
Head of KPMG Corporate Finance Julian Vella says the so-called new economy had driven most of the market activity and interest rate rises had little impact on the capital raising trend.
"We expect equity raisings to continue at a high level while market conditions remain favour-able. The recent high volume of activity, combined with volatility in overseas markets may im-ply a market peak," Vella says.
Initial Public Offers (IPOs) also climbed in line with the raising of fund with 86 for the period, easily exceeding the 72 for the 1997-1998 year and 49 for 1998-1999.
The 70 IPOs were dominated by Internet and technology related stocks. KPMG Capital Markets Melbourne head Les Cullen says IPO activity, particularly in this sector, should continue.
There would also have to a be a huge drop in the market, Cullen says, for smaller cap stocks to go back to venture capital forms of equity raising.
"I think it's difficult to say that we will see activity forever but providing the fundamentals are there, in the short term there should be no change," Cullen says.
"Volatility in the market doesn't lead to a change in (IPO) volumes, but it is making investors look a bit closer, investors have learnt to live with volatility."
AUTHOR
Jason Spits
Recommended for you
Far too few wealth managers are capitalising on the opportunity presented by disruptive technology to deliver personalised investment solutions to the mass affluent demographic, according to PwC.
With over half of advisers using managed accounts, HUB24’s head of managed portfolios has unpacked the benefits driving their usage and how they can be leveraged by advice practices.
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
ASX-listed platforms HUB24, Netwealth, and Praemium have used their AGMs to detail how they are using artificial intelligence to improve their processes and the innovative opportunities it presents.
