14/07/2011 - 00:00

Smaller raisings lead IPO market

14/07/2011 - 00:00

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IN what is viewed as a tough market for floats, a number of smaller initial public offerings have forged ahead with their plans to list on the Australian Securities Exchange.

Smaller raisings lead IPO market

IN what is viewed as a tough market for floats, a number of smaller initial public offerings have forged ahead with their plans to list on the Australian Securities Exchange.

A number of WA companies, including copper explorer Quintessential Resources, gold exploration company 888 Resources and uranium exploration company Ridge Resources, are set to float this month, each raising between $2 and $6 million.

Perth-based, Papua New Guinea operated Quintessential claims it is on track to list next week, offering 30 million shares at an issue price of 20 cents each to raise $6 million.

Quintessential managing director Paige McNeil said a combination of the resources company’s assets and good timing made it a natural decision to carry out an IPO.

“Even though the market is difficult, an IPO provides excellent leverage for your projects because investors still want to get in at that base level,” Ms McNeil said.

“I think our timing may be very good to ride the next wave, because the markets are cyclical … but you need a good asset, great people and a good story and we tick all of those boxes.”

Seven resources-focused WA companies listed on the ASX in June and July, all with raisings of $6 million or less.

Dempsey Minerals was first to be officially admitted in that period after it offered 12.5 million shares at 20 cents to raise up to $2.5 million.

Conto Resources followed after issuing 15 million shares at 20 cents to raise $4.5 million. Gold and copper explorer Naracoota Resources was the next cab off the rank after its $5 million IPO closed early and oversubscribed.

Pareto Capital associate director Ross Cotton said smaller raisings between $3 million and $8 million were more likely to succeed with listings.

“It has certainly gotten a lot tougher, getting the money is one thing but getting 400 able and willing shareholders is the other thing and the ones [IPOs] that have been pulled, are more at the top end of town,” Mr Cotton said.

“And often smaller IPOs are done on relationships with wholesale clients and their brokers so if a broker likes an IPO they can easily promote it to their client base.”

Despite the flurry of smaller raisings, a number of companies have decided to withdraw or defer their IPOs due to market volatility, the carbon tax and negative investor sentiment.

Underground mining contractor Barminco recently deferred the launch of its $600 million-plus IPO due to uncertain climate.

Steinepreis Paganini partner Mark Foster attributed uncertain economic conditions and market volatility here and overseas as factors prompting deferrals.

“The main reason we were seeing clients deferring their IPO capital raisings appears to have been related to the general perceptions regarding weak capital markets in the lead up to 30 June and the uncertainty specifically relating to the goings on in Greece and elsewhere in Europe,” Mr Foster said.

Mr Cotton said the shift in investor sentiment was another factor.

“When the market weakens people can’t trade out of their positions so when it comes to investing in a new IPO, investors are just illiquid and that’s why you’ve seen a decline in IPOs over the last three months,” Mr Cotton said.

Mr Foster said the largest percentage of floats still related to exploration projects either in Australia generally or overseas, with gold, nickel, copper and coal projects retaining their popularity.

 

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