As over $1bn worth of initial public offerings launch in the Australian market on Tuesday, market watchers are betting that commodity prices could add a slight dampening effect on the deals at the margins.
Most eyes will be on the $685m float of Virgin Australia, marking its return to the Australian Securities Exchange as a $2.3bn business after it collapsed in 2020, but the other launch on the local stock exchange will be Greatland Gold.
Greatland Gold is already listed in the UK, but it has embarked on a $490m IPO to list here, pricing at the top of its price range of $6.40 to $6.60 per share.
The listing was to fund the purchase of the Telfer gold mine, for which owner Newmont was paid with a combination of cash and shares.
The gold price has rallied since it initially started the planning phase of the listing, pushing up Greatland Gold’s share price in the UK.
However, the gold price has been volatile in Australia in the last few days, which could place some pressure on the deal at the margins.
Yet another factor that could place pressure on the performance of Greatland Gold is that with the stock no longer having London as a primary listing, some of its British-based institutional investors could be sellers, because it will not gain index inclusion and will no longer be relevant.
Secondary listings involving chess depositary interests have a history of creating soggy share market debuts.
Weighing in favour of Virgin Australia, is there are understood to be few hedge funds in the IPO, which would limit initial selling of shares on day one.
But since the IPO was locked in during the first week of June, shares in airline stocks globally have come off the boil.
In the past four weeks, Qantas shares are down close to 2 per cent and down 2.6 per cent in five days, Air New Zealand is down more than 6 per cent over the past month and almost three per cent in five days, while American Airlines, which is listed in New York, is down 5 per cent in the past month, but up almost 3 per cent in the past five days.
In Europe, British Airways owner IAG is down 1.4 per cent in the past month and flat in the past five days.
Singapore Airlines is down 2.5 per cent in the past five days and down 4.5 per cent in the past month.
Weighing on airline stocks has been the higher cost of oil amid war in the Middle East, as it will push fuel costs for the airlines higher.
However, despite the minor headwinds, both are expected to do well, based on how they are structured.
This is particularly the case with Virgin Australia, considered to be modestly priced in comparison to Qantas and with a limited selldown.
The other IPO making its debut this week will be sustainable infrastructure owner Infragreen, which lists on Wednesday.
The market value will be $219.9m with $40m raised for its IPO at $1 per share.
The company has a strong focus on recycling and waste recovery alongside clean energy and the energy transition.
The business is owned by Declan Sherman and is backed by rich lister John Van Lieshout.
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