31 January 2021

The IPO Market in 2020 – the Final Scorecard

VICTORIA GEDDES, Founding Director


In September 2020 the door to the IPO market flew open and dozens of companies poured through in a rush to list before the Christmas/New Year shut down. Memories were still fresh from late 2019 when a promising IPO market was stopped dead in tracks in October as several high profile companies (Latitude Financial, Property Guru and Retail Zoo) abruptly pulled their listings. With IPO markets the unspoken rule is that when it’s open you don’t delay as there’s no guarantee it will stay that way.

As we noted in our September 2020 blog, (The IPO door is wide open, but for how long?) the pandemic ensured that no-one had been banking on a quick return in 2020 to the levels of activity that the market had enjoyed in the four years prior to 2019. In the first three quarters of 2020 there had been only 24 listings and half of those had a market cap less than $50 million. This was the lowest level of listings recorded in over 7 years.

At FIRST Advisers, we tracked listings (excluding reverse takeovers and dual listings) through the final quarter to see if what seemed like wildly optimistic predictions of more than 50 IPOs in the lead up to Christmas would actually come to pass. Given the tight time line we were also interested to see how many would get pulled or delay until a later date.

The final total of 54 was a record for listings in Q4, of which 29 were in December, bringing the total for 2020 to 78. While this is an increase of 24% on 2019, it is still well below the average of 104 per annum from 2015 to 2018. Equally the total of around $5bn that was raised over the year (75% in the final quarter) is below previous years, highlighting the bias to small cap listings of less than $100m market cap in 2020.

At least 8 failed to last the distance including Fantastic Furniture, law firm HWL Ebsworth, Lendi (subsequently merged with Aussie Home Loans), mining services company DDH1 Drilling and oyster producer East 33. All except East 33 all had projected valuations at IPO of at least $400m.

The pipeline of IPOs for the New Year remains strong with 6 listing in January and at least another 10 slated for the remainder of the first quarter (9 listings 1Q2020).


The Busiest Brokers

The majority of listings involved multiple brokers, with six mid-market brokers accounting for the lion’s share of activity. Nevertheless three brokers dominated in the last quarter – Morgans (11), Canaccord (9) and Bell Potter (8). They were followed by Shaw and Partners (7), Ord Minnett (5) and Wilsons (3).

The tier one brokers averaged 2 listings each during the quarter but, as would be expected, they tended to be at the larger end of the market cap. scale. The three largest IPOs were Liberty Financial and Nuix (each $1.8bn) and Dalrymple Bay Coal Terminal ($1.3bn). The size of the Nuix raising ($975m) meant that the lead brokers on the deal, Macquarie and Morgan Stanley, easily topped the market for most funds raised during the quarter, closely followed by Credit Suisse and BAML.

Most Popular Registries

If further proof was needed that there is a fundamental shift underway within the registry space, look no further than how the five registry players fared in terms of winning new business through new listings.



We have written before on the meteoric rise of Automic as the emerging registry in the Australian market, (A new number 3 share registry), and this is further demonstrated by their success in winning a third of all IPOs in the last quarter. With LINK retaining its strong market position, it would appear that the battle for market share being played out in the new issuance market is largely at the expense of Boardroom, Advanced and Computershare.

Best Performers Since Listing  

Finally, the analyst in me can’t resist a scorecard. So which IPOs have been the best and worst performers since listing up to 29 January 2021 and is there a common theme that defines them?

Best performers were microcaps with exposure to the gold sector and mining services.

Outside these groups, the second strongest performer was 4D Medical which now has a market cap of $600m+ and joined the All Tech Index in December.  Coming in at number 7, Aussie Broadband is the 5th largest provider of nbn services – current market cap is $470m,

Top 10 IPO Performers 2020

ASX CodeCompany% Since
Listing
Listing
Date
Market Cap
at Listing
Sector
CPNCaspin Resources+203%25/11/20$14mGold/Base Metals Explorer
4DX4D medical+201%06/08/20$194mHealthcare Equipment
DDBDynamic Drill and Blast+160%05/08/20$11mMining Services
SNGSiren Gold+158%05/10/20$20mGold Explorer
DM1Desert Metals+150%16/12/20$13mNickel/Gold Explorer
BNZBENZ Mining+148%21/12/20$49mGold Explorer
ABBAussie Broadband+147%16/10/20$190mTelecommunications Services
KAUKaiser Reef+130%28/02/20$238mGold Producer
CCRCredit Clear+99%26/10/20$79mSoftware and Services
MKRManuka Resources+93%14/07/20$149mGold/Silver Producer

The other end of the scale is populated by listings that are generally larger cap in size, with non-bank lenders and BNPL companies well represented. Around 30% of new listings in 2020 were in negative territory for investors by the end of January 2021, reaffirming the ‘buyer beware’ adage for investors looking to pick winners in the IPO market.

The largest IPO in this group was Dalrymple Bay Coal Terminal. It was also the third biggest listing in 2020, heavily marketed to retail investors for its attractive yield. By contrast one of the smaller stocks to list, Emyria, is focused on research into the clinical use of Cannabidiol (CBD) a chemical produced by the cannabis plant that is non-psychoactive and may be capable of relieving conditions as disparate as depression, arthritis and diabetes.

Top 10 Underperforming IPOs in 2020

ASX CodeCompany% Since
Listing
Listing
Date
Market Cap
at Listing
Sector
EMDEmyria-40%12/02/20$38mHealthcare Services
PLTPlenti-37%23/09/20$280mNon-bank Lender
HMYHarmoney-29%19/11/20$353mNon-bank Lender
YFZYoufoodz-28%08/12/20$202mFresh Delivery Meals
PYRPlayright-27%23/10/20$108mBuy Now Pay Later
ZBTZebit-27%25/10/20$185mBuy Now Pay Later
PAMPanAsia Metals-20%07/10/20$25mTungsten/Lithium Explorer
HXLHexima-20%01/12/20$26mAnti-Fungal Technology
DUGDug-19%12/08/20$134mComputing as a Service
DBIDalrymple Bay Coal-19%08/12/20$1285mCoal Port

The Importance of Good Investor Relations post IPO

 Post IPO, the primary role of brokers, corporate advisers and PR firms in marketing the listing shifts to the investor relations specialist. Whether this role is in-house or provided by an IR firm, it is important that the company has access to the appropriate experience and expertise required to work in this industry. It is not an extension of PR, which is a very different skillset, and it is worthwhile taking the time to research who operates in this industry, what their background and qualifications are and whether they can demonstrate a long term commitment to the development and support of investor relations.

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