Floats flood onto market

INVESTOR appetite for technology stocks and a buoyant economy were the primary driver behind a 138 per cent increase in initial public offerings in 1999 according to a survey by PricewaterhouseCoopers.

They survey showed that 107 companies, trusts and funds listed in 1999 compared to 45 in 1998.

In December alone, thirty-five companies were floated compared to a total of twenty-six for the first six months of the year.

Despite the substantial increase in the number of floats, only $4.1 billion in equity was raised – a reduction of $1.5 billion on 1998.

However, if the Cable & Wireless Optus float of $2 billion in 1998 and Telstra’s $14 billion float in 1997 are removed, 1999 raised substantially more equity.

Of the money raised, just over $500 million was to reduce debt while about $1.8 billion aimed at expansion.

The only two property floats during the year accounted for more than $500 million, or 13 per cent, of the funds raised.

The premium on listing for both small and large capitalisation floats increased 17 per cent in 1999 to 21 per cent and 45 per cent respectively.

Around 23 per cent of the companies increased their share price in absolute terms by 100 per cent or more by 31 December.

Some technology stocks increased their share price by more than 250 per cent, including Open Telecommunication,, Melbourne IT and MYOB.

PricewaterhouseCoopers found that, contrary to general expectations, floats whose primary purpose was for future expansion under-performed those which raised capital for less ‘positive’ reasons such as debt reduction or to realise vendor investment.

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