Last-minute IPO Rush May Salvage Australias Worst Year For Deals

The Australian Securities Exchange is counting on a pipeline of at least a dozen companies to help salvage what is shaping up as the market’s worst year for initial public offerings since the global financial crisis in 2008.

Lightweight wheel manufacturer Carbon Revolution Ltd. and mining explorer Godolphin Resources Ltd. are among companies targeting to raise A$371 ($253 million) combined before the end of this year, according to pre-listing documents on the ASX website. Those eyeing share sales also include Aerial mapping company Aerometrex Ltd. and agricultural biotech company Terragen Holdings Ltd.

The success of these listings would help ease concerns over the appetite for IPOs in Australia, where more than $1.5 billion of first-time share sales have been withdrawn this year — the most since 2008, when $2 billion of IPOs were postponed, according to data compiled by Bloomberg.

“It’s not as dire as it seems given the number of deals that have been delayed,” said Cecily Conroy, KPMG Australia’s head of equity capital markets, in an interview, citing what she described as a strong pipeline of businesses preparing to sell shares in 2020 and sustained demand among investors for secondary issuance.

Adding to the lineup of potential stock sales this year is Tyro Payments. The payments processing company will seek to raise as much as A$253 million in an IPO with listing slated to start Dec. 6, according to a statement on Monday.

Latitude Financial Group Ltd., a non-bank consumer lender, last month postponed a A$1.04 billion launch that was to be Australia’s biggest this year. Other IPO hopefuls pulled sales the same month, including online real estate listings business PropertyGuru Ltd. and equipment rental provider Onsite Rental Group Ltd., shelving a further A$685 million of share market debuts.

Companies still eager to go public before year-end may succeed if they’re able to learn from the earlier failed launches, and adapt their pricing and structure, Conroy said.

The new wave of IPO hopefuls also may attract investors interested in companies that raised funds for productivity improvements, rather than to provide a quick payout for private equity firms, said Alexandra Clarke, portfolio manager at Sydney-based Ellerston Capital.

Carbon Revolution, based in Geelong in the state of Victoria, plans to use some of the IPO proceeds to expand and automate its manufacturing facility, while Aerometrex needs to grow its subscription imaging system, according to their prospectuses. Ellerston Capital was a seed investor in South Australia-based Aerometrex. The firm generally stays invested in IPOs it backs for a number of years, Clarke said.

“It’s a bit different from the larger IPOs, where we’ve seen it’s a way for initial investors to take money off the table,” Clarke said in an interview. “At the small end of the market, they’re generally after capital for the next leg of growth.”

IPO investors have embraced new issuance from a range of businesses, including some in the same industries as those companies that were forced to pull their initial sales, said Julian Beaumont, investment director at Bennelong Australian Equity Partners in Sydney.

“I don’t think the window shuts,” he said. “I don’t think you’re precluded from coming to markets. You just have to have something worth offering.”

Bloomberg