Pipeline for IPOs ‘very subdued’ amid economic uncertainty, HLB Man Judd says

It looks like another tough year for new ASX-listed companies, with a record-low number set to join the bourse, according to advisory and accounting group HLB Mann Judd.

Experts predict 2024 could be another tough year for new listings on the Australian sharemarket unless there is a sharp upturn in confidence about the market outlook, according to a new report by advisory and accounting firm HLB Mann Judd.

The firm’s annual IPO Watch, released on Wednesday, notes that 2023 saw a low of only 32 new listings on the ASX - most of them small cap companies - and marking the lowest since the firm started its report in 2004.

This was despite the fact that the ASX All Ordinaries Index grew by eight per cent over the year.

The figures compare with pre-Covid years when new listings of more than 140 a year were common for the ASX.

The report says that the current level of listings, with only five small cap local companies registered to go ahead this year, is even lower than this time last year.

Four of the companies registered to list are mining companies with one wealth management company, The Australian Wealth Advisory Group.

The largest proposed listing of an Australian company for 2024 is only seeking $10m.

The year could see a much larger listing of Virgin Australia which has been in the hands of private equity after its collapse in 2020 in the wake of Covid shutdowns, but, so far, no announcement has been made.

“2023 saw the lowest number of listings since HLB Mann Judd published its first IPO Watch in 2004,” Marcus Ohm, the firm’s corporate and audit services partner said.

“As it stands, the pipeline (for new listings) remains very subdued, with many businesses waiting for improved market conditions.”

“The highest amount sought is $10m, indicating that the IPO market will continue to remain subdued until there are significant changes in the macroeconomic and geopolitical environment,” he said.

2023 saw 32 new listings on the ASX, raising a total of $847m – well below the 87 new listings in 2022 which raised just over $1bn.

The report says this is the first time since 2012 when the total funds raised from new listings did not exceed the $1bn mark.

Most of the investors in the new listings, which included some 25 small cap companies, did not do well, with prices on the companies ending the year down by an average of 10 per cent – much more than the two per cent average fall suffered by new listings in 2022.

The firm’s Perth based partner, Brad McVeigh, said the current environment indicated that 2024 will continue to be a tough year for the resources sector, particularly if the Reserve Bank continued to increase interest rates.

“However, if gold prices manage to break through the $US2,000 level or lithium goes on a run, this might act as a catalyst for greater interest in the junior explorers.”

At the moment there are only two Australian companies which have set a date to be listed on the ASX this year: Fuse Minerals and Golden Globe Resources, with both in February.

Others which have registered with the ASX but have not set a date for listing are Far Northern Resources, The Australian Wealth Advisory Group and Western Australian Energy Resources.

Last year saw 24 of the 32 new listings from the resources sector including eight new lithium companies, five new gold companies and six new rare earth companies.

The amounts involved were small with 19 of the 24 new listings raising only $10m or less.

Most of the new listings came from Western Australia.

But ASX executives have challenged the firm’s cautious outlook arguing that there is a much larger potential pipeline of companies lining up to list on the ASX this year than is currently evident.

ASX’s group executive, listings, Blair Beaton, and general manager listings, James Posnett, said 2023 was a tough year for new IPOs globally as investors were concerned about interest rates and the global outlook.

But they said that there were far more companies potentially coming to the ASX this year including foreign companies which are choosing to be dually listed on the local bourse such as Canada’s Capstone Copper which is due to list here on February 2.

They said there were several venture capital companies which were looking at potential ASX listings of companies they had held for seven to ten years with investor sentiment improving as the outlook for interest rates looked more positive.

“This year is going to be a lot more active than last year,” Mr Beaton said.

“There is a lot more pent up demand which is currently sitting on the sidelines.”

He said the fact that the ASX 200 VIX had been below 15 for some time, indicating lower levels of volatility in the market than in 2022 when it was over 20, would also provide more confidence for ASX investors this year.