Signs of life in IPO drought

Improved investor confidence and lower economic volatility could set the stage for a bounceback in company listings

- MATTHEW GIBBS

We'll all be rooned," said Hanrahan, "before the year is out." The W gloom merchant from John O'Brien's outback ballad was referring to the weather, but he could just have easily been lamenting the state of new company listings on the Australian Securities Exchange (ASX).

The market for initial public offerings (IPOS) has been "keepin' dry" for the past 18 months. High inflation, rising interest rates and geopolitical calamity have seen to that. Business likes certainty and times have been anything but.

However, there's cause for optimism, with some market experts expecting an IPO pickup in 2024. "We are emerging from the bottom of the cycle in what is traditionally a cyclical market," says Blair Beaton, group executive for listings at the ASX. "We are starting to see greater certainty on inflation and, therefore, interest rates. These factors, plus a sustained period of low volatility, will help the IPO market reopen." There are dangers, however. "Increased geopolitical risk will likely lead to an uptick in volatility. But it remains to be seen how this will play out with IPO processes," says Beaton.

The improved outlook - or "signs of life" - are welcome. New listings are regarded as a barometer for the health of the market overall.

"The IPO market has been very difficult so far in 2023 with only 30 companies successfully listing over the calendar year to the end of October," says Marcus Ohm, partner at HLB Mann Judd Perth, who reports on the annual state of play for IPOS. Most were small-cap resources listings based in Western Australia.

"To provide context, this is against the backdrop of a record year in 2021 [when there were more than 200] and reflects the difficult environment for IPOs that first emerged towards the end of 2022," says Ohm.

According to ASX numbers, 2023 will be only the third year since 2010 when the number of new listings has dipped below 100. The others were 2019 and 2012.