Record floats: KPMG

The mania of the last half of 1999 resulted in a record number of Australian companies joining the feeding frenzy.

In the six months to the end of December, eighty-six Initial Public Offers or public floats were completed compared to just forty-nine for the whole of 1998-99, according to the latest KPMG Corporate Finance survey of Australian capital markets.

The strong market conditions raised a record $23 billion of

new equity for the half year – compared to the $27 billion raised in the full year of 1998-99.

Retail investors contributed an estimated $7 billion to $8 billion of the $13.6 billion raised through floats in the six month period, with about $6 billion invested in the Telstra2 offer and the remainder in the many newly listed telecommunication and technology companies.

Smaller mostly Internet- based based companies dominated float activity in the latest half year, with 70 of the 86 floats each raising $50 million or less.

This compares to 39 floats each raising less than $50 million in the full 1998-99 year.

KPMG Corporate Finance head Julian Vella said the “new economy”, comprising technology and media-based stocks, accounted for most of the activity in the market.

“Recent official interest rate rises have done little to dampen the enthusiasm of companies to raise capital or the appetite of investors,” Mr Vella said, before the recent drop in stocks.

“Looking ahead, we expect equity raisings to continue at a high level while market conditions remain favourable.

“However, the recent high volume of activity, combined with volatility in overseas markets, may imply a market peak,” he said.

The first KPMG Corporate Finance survey of capital markets, released in October 1999, forecast a 20 per cent increase in equity capital raisings to between $32 billion and $34 billion in the year to June 30.

In light of the strong half year results this forecast still looks achievable.

The survey showed the top five floats posted capital gains for investors of between 380 per cent and 545 per cent, led by computer software provider MYOB.

The telecommunications and media sectors accounted for 55 per cent of the total equity raised, and 67 of he 86 new listings recorded share price gains, reflecting positive market sentiment towards technology and media-based stocks.

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