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Mixed results for local listings typifies 2002

THERE were mixed results for WA companies hoping to make it to the boards during the past six months. The majority of the 13 to make the cut had a less-than-spectacular debut, with the average return firmly in negative territory.

Little more than a month after listing Cervantes Seafood Limited, chaired by Barry MacKinnon, has had its share value slump 33 per cent from the 20 cent issue price to sit earlier this week on 13 cents. Another 20 cent, $4 million float, that of Universal Resources Limited, has fallen to similar levels.

Vulcan Resources has fallen around 10 cents from its 25 cent per share issue price, while De Grey Mining, backed by Croesus chief Ron Manners, is languishing at 12 cents, having yet to reach its 20 cent issue price.

On average the share price for the new stocks were more than 13 per cent lower than their opening price and significantly worse than the average WA stock performance.

But the trading performance has not taken the breath out of those willing to back new ventures.

Around Australia the value of floats increased almost 200 per cent to $1.92 billion from the previous corresponding period when only $663 million was raised.

The number of IPOs increased from 25 in the December 2001 half year to 38 in the latest six-month period.

KPMG Corporate Finance, which complied a study into IPOs, said WA resource stocks swelled the IPO numbers, with 13 of the 38 new listings based in WA. KPMG’s national head of mergers and acquisitions, Anthony Cohen, said WA firms raised $78 million in the December half year.

He said national IPO activity was dominated by a small number of large floats that generally returned solid results for investors.

“The top 10 floats accounted for almost $1.8 billion of the $1.9 billion raised, while the 10 smallest IPOs raised only $21 million,” Mr Cohen said.

Yet while investors were willing to back new IPO offerings, once listed, the companies were often ignored. Mr Cohen said the price performance of IPOs in the December half-year highlighted the continuing lack of investor support for smaller IPOs.

“Of all the IPOs to list so far in the December 2002 half-year, just over 50 per cent are trading below their issue price,” he said.

This figure jumps to 80 per cent among the smallest 15 IPOs to list so far. The IPOs’ performance has been undertaken against the backdrop of a relatively good market. IPOs of the past six months lost an average of around 13 per cent on their opening price to December 12. However, the Deloitte WA Index released this week shows the overall WA stock performance fell only 4 per cent from July 1 to November 30.

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