25/09/2008 - 15:54

IPO numbers tumble

25/09/2008 - 15:54

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Initial public offerings on the Australian share market have sunk to a low of 14 for the first quarter of 2008-09, with 11 of these in the mining sector, according to Ernst & Young's quarterly IPO analysis.

Initial public offerings on the Australian share market have sunk to a low of 14 for the first quarter of 2008-09, with 11 of these in the mining sector, according to Ernst & Young's quarterly IPO analysis.

This compares with 59 listings for the same quarter in 2007-08 and 18 in the immediate previous quarter (Q4 FY08).

Ernst & Young partner and Strategic Growth Markets (SGM) leader Jon Dobell says the small number of listings is "clearly no surprise" given the ongoing market volatility.

"The vast majority of these listings were small mining companies raising money for exploration programs," says Dobell.

However even metals and mining sector listings, which have dominated the volume of IPOs on the Australian market in recent years, have fallen well back - down from a recent peak of 43 in the second quarter of FY08.

All but one of the 14 new listings for the current quarter are now trading below their listing price.

"With the current market turmoil, IPOs will dry up even further until markets stabilise."

With refinancing costs and banking covenants now much tougher, Dobell says companies that have to raise capital may be forced to trim expansion plans or turn to trade buyers or private equity houses.

Dobell says companies even considering an IPO in the next 12-18 months should begin preparing now so they are ready when markets stabilise and IPO windows re-open.

In total $1.4 billion was raised from 14 listings for Q1 FY09, however one listing, BrisConnections, accounted for $1.2 billion of this.

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