IPOs values drop by $11b in 2022

HLB Mann Judd research has found initial public offerings (IPOs) raised just over $1 billion in 2022, compared to $12.3 billion in the previous year, with market uncertainty likely to dent activity in the first half of 2023.

In its latest IPO Watch Australia Report, the global chartered accounting and advisory firm analysed  IPO activity over 2022 and found listings plunged 54% year-on-year, down from 191 listings in 2021 to 87 in 2022.

Much of the weakness came in the second half of 2022, coinciding with aggressive hikes to interest rates from the Reserve Bank of Australia (RBA), aimed at quelling inflationary pressures.    

Just 28 IPOs were launched in the months from July to December 2022, compared to 59 listings in the first half of the year.

In value terms, IPOs raised approximately $1.07 billion, compared to a record-breaking $12.3 billion in 2021, just under $5 billion in 2020, and just under $7 billion in 2019.

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However, fewer IPOs were listed in 2020 (74) and 2019 (62), which saw a greater proportion of large-cap launches.

In contrast, small-cap companies (those with a market capitalisation of less than $100 million) made up just under 90% of listings in 2022.

When analysed by sector, the materials industry represented 72% (63) of all IPO listings in 2022, raising a combined $576 million.

No other sector hit double-digit listings, with the energy sector reporting the second-largest number of listings (7), raising approximately $105 million.

In value terms, the energy sector ($188 million), and the commercial and professional services industry ($105 million) were the only other sectors to raise over $100 million from IPO listings in 2022.

Moreover, just 70% of companies launching IPO listings in 2022 achieved their subscription targets, down from 87% in 2021 and below the five-year average of 81%.

Newly-listed companies also failed to maintain or grow their share price after launching on the ASX, closing the year 2% lower than their IPO price.

According to Marcus Ohm, author of the report and partner at HLB Mann Judd Perth, the 2022 result reflected significant economic and geopolitical instability.

“Macroeconomic and geopolitical issues, coupled with rising inflation, resulted in the RBA lifting interest rates for the first time in 12 years, significantly impacting the stockmarket and subsequently IPOs,” he said.

“Perhaps more than any other year, 2022 was definitely a year of two halves. The first half of the year looked relatively healthy, with 59 new listings which was comparable to the 61 at the same stage in 2021. However, the second half of the year saw the IPO market all but dry up.”

Ohm said he expected subdued IPO activity to persist over the first half of 2023.

“Market uncertainty is continuing to inhibit any significant new listings coming to market, with only 10 small-cap entrants in the pipeline looking to raise an average of $8 million,” he added.

But this could change, with Ohm pointing to the potential re-listing of Virgin Australia on the ASX.

“If the company goes public in 2023, it will be one of the market’s biggest IPOs for some time, and perhaps hints at greater confidence in the IPO market than the formal pipeline suggests,” he said.

“Nonetheless, the extent of any improvement in the IPO market for 2023 will depend on the reduction in the macroeconomic and geopolitical factors currently impacting markets.”