Downturn scares companies away from sharemarket floats

Just eight companies floated on the Australian Stock Exchange in the first six months of 2009, raising a paltry $90.86 million between them, according to the latest IPO Watch update from HLB Mann Judd Corporate Finance.

The tiny number of floats represents an 84% drop in the number of floats against the corresponding period in 2008, and 92% in 2007, when the economy was booming and companies were lining up to launch IPOs.

However, there were some positives to come out of the study.

The rebound in the sharemarket has helped the share prices of the freshly-floated companies hold up very well. In the first six months of the year, the share prices of the companies that listed on the ASX fell just 1%; in 2008, prices of newly-floated companies fell 63% from issue to year end.

Geoff Webster, director of HLB Mann Judd Corporate Finance, also points out that the average amount raised by small caps (companies with market capitalisation of $100 million or less) was $11.36 million, compared to $7.45 million in 2008 and $8.75 million in 2007.

“We see the result as partly symptomatic of the extremely low number of new companies coming to market so far this year; it could also indicate that investor confidence is on the
rise,” Webster said.

The average market capitalisation of small cap companies floating over the first half of 2009 was $43.9 million, up 80% increase on 2008 and 107% on 2007.

Webster said the increased market cap result provided further evidence that only stronger companies would pursue an IPO given the current state of the market.