25/07/2017 - 13:57

More IPOs, less raised

25/07/2017 - 13:57

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About a quarter of ASX floats in the six months to June were undertaken by Western Australian companies, but the total amount raised is falling according to a new report.

More IPOs, less raised
There were 10 WA-based companies to list on the ASX in the six months to June, after completing an IPO.

About a quarter of ASX floats in the six months to June were undertaken by Western Australian companies, but the total amount raised is falling according to a new report.

There were 57 new listings in the first half of 2017, up from 34 in the six months to June 2016, with 10 of those undertaken by WA-based companies, according to HLB Mann Judd’s IPO Watch mid-year update.

Of the national total, about 86 per cent of those companies to have completed initial public offerings were small cap companies (with a market capitalisation of less than $100 million).

“As a result, there has been a reduction in the total amounts raised for this six-month period compared to last year, at $1.9 billion down from $2.5 billion in H1 2016,” HLB Mann Judd Perth partner Marcus Ohm said.

“A significant portion of companies that have applied to list in the second half of the year are also small caps, therefore it is possible that we will see a meaningful drop in the total amounts raised in 2017 compared to recent years.”

According to research undertaken by Business News, the majority of IPOs in WA were undertaken by junior exploration companies, with companies such as Magmatic Resources, Todd River Resources, Alderan Resources and Zenith Energy having debuted on the ASX in the past six months.

Mr Ohm said the pipeline of listings for the remainder of the year failed to show any particularly large listings on the horizon.

“As at June 30, 21 companies have applied to list and junior exploration companies are likely to be a strong contributor, particularly the materials sector, which currently has 10 proposed listings seeking to raise a total of $75.5 million,” he said.

“In terms of funds sought, investment stocks dominate, with three proposed listings looking to raise a combined total of $362.2 million, or 68 per cent of the total.

“The pharmaceuticals, biotechnology and life sciences sector has also seen some movement in the first half of 2017, with four listings raising a total of $37 million.

“A number of these listings were related to medical marijuana after recent legislative changes.”

Mr Ohm said a key change in the statistics was the decline in the number of reverse takeovers/backdoor listings.

“With only 10 reverse takeovers in the first six months on 2017, it is clear that the recent attractiveness of this listing route has significantly reduced,” he said.

“In contrast, there was a total of 69 backdoor listings in 2016, which highlights the extent of the reduction in the first half of 2017.

“The changes to the ASX listing rules, which came into effect in December 2016, have made the reverse takeover route much less attractive.”

Of the 10 reverse takeovers this year, all started proceeding before the new rules came into effect, Mr Ohm said.

“Most occurred in the first quarter of this year, with only two taking place in the second quarter. We would expect this trend to continue for the remainder of the year,” he said.

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