IPOs slow but WA still shows the way

Stock market volatility has put a dampener on the number of Western Australian companies that floated during the March quarter, but surprisingly, the amount of funds raised was 75 per cent higher than in the same period last year.

Seventeen WA companies listed on the Australian Securities Exchange during the March 2008 quarter, which, according to Deloitte, was more than double the number in any other state.

“While the number of WA-based IPOs was down from 21 in the previous corresponding period, the amount of funds raised in WA increased from $96.2 million in the March ’07 quarter to $167.8 million in the March ’08 quarter,” Deloitte corporate finance partner Andrew Annand said.

On a national level, 33 IPOs were completed with a combined capital raising of $415 million.

This was slightly lower than in the March 2007 quarter, when 35 companies floated  to raise $421 million, but was much lower than the flurry of IPOs during the second half of 2007.

The state’s resources sector once again dominated the March quarter list, with three uranium exploration outfits listing on the ASX.

However, it was Perth-based investment company Ozgrowth Ltd – backed by stockbroker Euroz Securities – that netted the highest amount of funds raised, pulling in an oversubscribed $80 million.

Other companies to pocket a substantial amount of funds through their IPOs included Utah-focused explorer White Canyon Uranium Ltd, which raised its minimum subscription amount of $17.5 million, and nickel explorer Emu Nickel Ltd with $10 million.

Outside the resource sector, recruitment companies also made a play for the ASX with both Total Staffing Solutions Ltd and Interstaff Recruitment Ltd listing during the quarter, while alternative waste technology developer AnaeCo Ltd raised $3 million.

Mr Annand believes the success of IPOs comes down to pricing.

“The pricing must have been acceptable both to the investors but also to the businesses and vendors,” he said.

The view is echoed by Patersons Securities director Aaron Constantine, whose firm completed several capital raisings, although the volume was down during the quarter.

Mr Constantine said the current market volatility made it difficult to determine a price that would work for all involved.

“Unless people particularly needed the money, it was much easier just to bide your time and wait for market conditions to perhaps normalise so you can move forward in a stable and sensible environment,” he said.

While the March quarter was a surprise in terms of the number of companies listing on the ASX, Mr Constantine said the frequency of listings during each month over the quarter is a telling sign of how volatility had affected potential floats.

In January, seven WA companies listed on the exchange, but that dwindled to four in March.

There could be even fewer floats at the start of the June quarter, with one company, West Leederville-based Argent Minerals, so far the only stock to list and 11 businesses nationally to list between April and June.

While the number of floats may be higher than originally thought over the March quarter, positive returns were minimal.

According to Deloitte, China Steel Australia Ltd was the best performer over the period with an increase of 50 per cent against its issue price as at March 27, while Augustus Minerals’ share price dropped 48 per cent.

“Since listing to March 29  2008, the average share price movement of the March quarter WA IPOs was negative 23 per cent. Only four companies out of the 17 listed produced positive returns,” Mr Annand said.