MEDIA RELEASE: The second half of 2022 saw the number of initial public offerings (IPOs) drop significantly, with just 28 listings between July and December compared to 59 in the first half of the year, according to the latest HLB Mann Judd IPO Watch Australia Report.

The report analyses IPO activity over the past 12 months on a number of key metrics, including listing volumes, share price performance, industry spread and overall trends, as well as a review of the pipeline for 2023.

As a result of the drop in the second half of the year, the total number of IPOs in 2022 was down 54 per cent on the previous year (87 in 2022 compared to 191 in 2021).

Marcus Ohm, author of the report and partner at HLB Mann Judd Perth, said the volatility in the broader market had a significant impact on IPOs.

“Macroeconomic and geopolitical issues, coupled with rising inflation, resulted in the RBA lifting interest rates for the first time in twelve years, significantly impacting the stock market and subsequently IPOs.

“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.

“As a result, the amounts raised through IPOs fell 91 per cent in 2022, with just $1.07 billion raised compared to the record-breaking amount raised in 2021 of $12.33 billion. The amounts raised were also significantly below 2020 ($4.98 billion) and 2019 ($6.91 billion).

“Notably, there were fewer listings in 2020 (74) and 2019 (62) than in 2022, reflecting the contributions from large cap listings in these prior years,” he said.

Consistent with the trend seen in previous years, weaker market conditions resulted in the IPO market being dominated by small cap companies.

“During periods of market volatility or downturn, large cap companies avoid a public listing while small cap companies continue to come to market. This was certainly the case in 2022,” Mr Ohm said.

Of the 87 listings during the year, 78 were small cap companies (those companies with a market capitalisation less than $100 million), representing 90 per cent of the total number of listings. In contrast, small caps made up 76 per cent of 2021 listings and 58 per cent of 2020 listings.

Small cap entrants raised 54 per cent of total funds in the year, a considerably higher portion of total funds than the 11 per cent contributed by small caps in 2021.

Mr Ohm said the subdued conditions look set to continue in the first half of 2023.

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

“However, it is interesting to see that Bain Capital has recently announced it is seeking advice on relisting Virgin Airlines 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.

“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,” he said.

The market factors and weaker investor sentiment also impacted company subscription targets in 2022. In total, 70 per cent of listings achieved their target amount, a notable fall from 87 per cent in 2021 and below the five-year average of 81 per cent.

“New listings have struggled to meet subscription targets during the year, and also found it difficult to maintain and grow their share price in the period.

“Despite average first day gains of 16 per cent, gains for many new entrants were down at year-end and, on average, listings posted a loss of two per cent against IPO price.

“Notably, small cap entrants managed a marginal gain of one per cent at the end of the year, contrasting with an average year-end loss for large cap listings of 33 per cent. Only two of the nine large cap listings recorded a year-end gain.

“Despite this, the share price performance of new market entrants bettered that of the ASX All Ordinaries Index which finished the year down seven per cent year-on-year. The All Ordinaries rallied from a low of 6663 in June 2022 to finish the year at 7222. Investors will hope the rebound continues into 2023,” Mr Ohm said.