A report on initial public offer (IPO) activity in the domestic share market has shown the number of companies to list for the first time in 2006 totalled 165, up from 134 in the previous year.
Called the IPO Watch, the study is compiled by accounting firm HLB Mann Judd and is published on a six-monthly basis.
Of the 165 IPOs in 2006, 142 of them were performed by smaller cap companies with a market capitalisation of $100 million or less. The total capital raised by IPOs for the year was just over $5.8 billion.
According to HLB Mann Judd head of corporate finance Justin Audcent, the results for the year show equities are still in the forefront of investors’ minds.
“Investor appetite [for IPOs] remains very high. With bond yields remaining fairly low, portfolios are still being heavily biased towards equities,” he said.
“I think the depth of the capital markets was really demonstrated by the lack of impact that T3 had on other companies raising money in the market,” Audcent added.
Like the greater Australian equities market, commodities dominated the small cap IPO activity, accounting for 75 per cent of all new floats as opposed to 50 per cent two years ago.
But while the commodity related companies have increased their presence in stock exchange listings, IPO activities from the non-resource sector of the market has declined by approximately 40 per cent.
“One of the major reasons for that is not around demand for those companies, it’s around supply. We’re in a situation where we have a very active M&A (mergers and acquisitions) market that’s partly buoyed up by cashed up private equity fundsÉ but also a lot of corporates that have strong balance sheets, cash sitting around, and cheap access to debt as well,” Audcent said.
“This means a lot of the companies we might have seen as more traditional candidates for an IPO are actually finding they’re able to get higher valuation through pursuing a private equity raising,” he said.
The IPO Watch report did not include activity from property trusts or investment companies.
