(pictured: Marcus Ohm)
There was an improvement in the market for small-cap IPOs in Australia in the past 12 months, perhaps reflecting the higher returns from small-caps after several years of lagging large caps, but new small listings remain below historical averages.
The annual study by accounting and advisory group HLB Mann Judd, ‘IPO Watch Australia’, shows that 56 per cent of listings (48 out of the total of 85) were for stock with market capitalisations of less than $100 million. This compares with 43 per cent of the 70 listings in 2014.
“However the contribution from small caps continues to lag significantly behind the previous five-year average of 57 companies,” the study says. “It is also in stark contrast to the position several years ago, in 2012, when small-cap companies comprised 92 per cent of all listings.”
There was greater diversity in industry sectors last year, coving 21 different sectors. The tech, investments and healthcare industries were solidly represented with 44 listings. Predictably, resource companies continued to perform poorly with only four IPOs for the energy and minerals categories.
The smallest end of the range, for companies with a market cap of less than $10 million, saw only one listing last year, compared with two in 2014. The five-year average for these companies is 18 IPOs per year.
Marcus Ohm, a partner in HLB Mann Judd’s Perth office and one of the researchers, noted that, historically, this part of the market had been represented by junior exploration companies.
“It is likely that any significant improvement at this end of the IPO market is strongly linked to a sustained recovery in the resources sector,” he said.
Looking at the IPO market as a whole, first-day share price performance was mixed, with a total of 69 per cent of stocks recording first-day gains. The proportion recording year-end gains also improved, with 62 per cent above issue price at the end of 2015 compared with 55 per cent in 2014.
IPOs actually outperformed the market in 2015, with an average increase in share price of 10 per cent, compared with a loss of 2 per cent over the year for the ASX 200.