Stellar ASX debuts by Virgin Australia and Greatland Resources may spark IPO revival

Virgin Australia chief executive Dave Emerson with Virgin crew as they ring the ASX bell toon Tuesday to mark the trading debut. Picture: Getty Images

The stellar debut of Virgin Australia and Greatland Resources on the Australian Securities Exchange on Tuesday could open the door for other major listings in the months ahead.

But shut out in the cold for further initial public offerings could be retail investors – as Virgin, which closed up 33c or 11.4 per cent to $3.23 on its first day of trading, has significantly limited the allocation of shares to retail investors in the book build for its deal.

Of the $685m of shares sold at $2.90 each – giving the airline a $2.3bn market value – retail investors were allocated less than $68.5m, and many attribute the day-one success to how the transaction was structured.

Most of the take-up was from well-known Australian institutional investors; Argo Investments and Perpetual were among those emerging as among the top holders of the stock.

Retail investor funds are considered “hot money” by operatives in the equity capital markets world and they have developed a reputation for buying shares in an IPO and selling out in the first few days, along with hedge funds.

Part of the decision to swerve around retail investors in Virgin’s case would be understandable, regardless.

They were the ones that bought into Virgin Australia’s $325m retail bond offering in 2019; only months later it collapsed and they recovered a fraction of their investment.

There’s a view, with the recent success of listings where retail involvement was limited and the IPO size was modest, that it’s becoming a pattern.

Tapping into retail investors was the strategy for the listing of the DigiCo Infrastructure REIT last year by David Di Pilla’s HMC Capital, and shares are now at $3.59 after being sold at about $5 each in the IPO.

Some think gone are the days a decade ago when an IPO could have participation from retail investors accounting for as much as 50 per cent of the book build.

Adding optimism to the gold sector was also the strong performance of Greatland Resources, with its secondary listing in Australia on Tuesday in addition to the UK launch to fund its purchase of gold assets from Newmont Mining.

Greatland Resources’ shares closed 10.6 per cent higher at $7.30 as investors search for opportunities to gain exposure to the record gold price. The shares had been sold at $6.60 each.

The attention now turns to what other private equity funds and whether they choose the ASX in the next year as an exit route for their investments after Bain Capital successfully cashed out of Virgin through a listing.

Other private equity-owned businesses known to be preparing for the IPO runway are pet-care business Greencross, which is owned by TPG Capital.

Barrenjoey and Jefferies have been advising TPG on a potential future sale.

The question is at what price the US-based buyout fund is prepared to part with the company which was previously for sale at $4bn.

Australian Venue Co, which was purchased by PAG from KKR in 2023 for $1.4bn, is known last year to have been considering an IPO.

However, its move to distance itself from Australia Day celebrations in January caused a backlash and may impact those plans.

Another possibility is a backdoor listing of the business through rival pub operator Endeavour Group.

Aged-care operator Estia, which is also owned by Bain Capital, may choose to list the business that has been performing strongly.

A possible float of mining services provider Moly Cop has been mulled in recent years and may come back next year but is not currently thought to be on the cards for 2025.

The success of the latest listings come as welcome news for not just the vendors, but institutional investors, analysts and the ASX itself.

A long list of buyouts of listed stocks by private groups has resulted in a number of $1bn-plus Australian companies leaving the ASX since the global pandemic and, with few IPOs in recent years, the number of big listed stocks has diminished.