Small and mid-cap companies rush to float on the ASX before end of the year

It’s taken all year, but the great float rush of 2010 is finally on. Despite the fact there are little more than two full working weeks before the end of December, a total of 32 companies are set to hit the boards, including four set to list today.

While there are a few well-known names among the list – particularly Westfield Retail Trust, the vehicle with which Frank Lowy will spin off his Australian and New Zealand retail assets – the vast majority are small caps, including a slew of mining and technology groups.

But the pre-Christmas rush has become so bad that just getting a date to list has become something of a trial.

Earlier this week, the chief executive of RedFlow Energy, Phil Hutchings said the ASX had only been able to give the company a float window of four days and could not provide a firm date, such was the level of activity. The company is now set to float on December 14.

“We just had to take our place in the queue to some extent.”

While the float activity might be at the smaller end of the market, corporate finance consultant Reuben Buchanan from Wholesale Investor, says the float stampede was sparked by the biggest float of the year – the $6 billion QR National float.

The fact that QR’s shares rose after the listing has been taken as the sign of confidence brokers had been waiting for.

“Even though they struggled to get the float away, when they listed the shares went up, and that’s what the market was looking for,” Buchanan says.

Recent positive announcements in the biotechnology sector, particularly from biotech star Acrux, have also provided the market with confidence.

“A lot of companies have been ready to go, and now they have seen the opportunity to press the button.”

“If you don’t list before Christmas, you are probably not going to list before February or March, because January is just a write-off.”

Buchanan says most analysts had been tipping 2010 would be big year for floats, but for the first 10 months there were very few deals done, with many investors still nervous about the poor performance of the high-profiled Myer float in 2009.

While Buchanan says it’s hard to predict whether the IPO market will remain strong into the New Year with any degree of certainty, he says that if markets remains relatively stable there could be as many as 200 floats across 2011.

“There are truckloads of cash around looking for a home, and if anything represents a reasonable opportunity they are going into it.”

“There is just such a backlog of exits, particularly with the private equity firms. We haven’t even seen them come to the table yet.”

Indeed, a number of rumoured private equity floats, such as book retailer Red Group and cinema operator Hoyts, remain on hold.

Buchanan, whose company helps firms prepare for a float or raise pre-float capital, says he has been kept busy with requests from companies who are struggling to complete the last part of their capital raising, or from firms who are looking to bring other investors on board to satisfy the listing requirement that a company has more than 500 shareholders.

However, he says firms who are struggling to get the necessary spread of shareholders or level of capital should be wary about rushing just to beat the calendar.

“I think maybe some of them are a bit premature. I certainly would wait two or three months so the market has a better foundation.”