Technology floats shine as the coronavirus pandemic accelerates change

COVID-19 forced employees to work from home, triggering an accelerated digital transformation of all industries.

While markets largely shrugged off the COVID effect in recent months, it’s been a difficult year for initial public offerings. According to EY’s Global IPO Trends report, Australia and New Zealand IPO activity fell 41 per cent by volume and 82 per cent by value compared with year-to-date 2019.

However, supported by a stunning recovery rally in the Aussie market and a booming tech and healthcare sector, the COVID-inspired lull in the IPO market vanished.

In its place came a flurry of high-growth small cap tech companies looking to list and capitalise on the country’s move to digital. Tech is the fastest-growing sector on the ASX.

Coincidentally, IPO activity in the first half of the year (to June 23) closely mirrored stocks that were doing exceptionally well during COVID-19. Another tailwind that added to the momentum was the higher number of investors, with many first-[time investors entering the fray.

COVID-19 forced employees to work from home, triggering an accelerated digital transformation of all industries. What was slated to take place over three to five years is happening right now. And a good example of this is e-commerce and the buy now, pay later sector.

The success of Afterpay spawned a series of BNPL listings — Zip Co, Sezzle, Splitit, Openpay, LayBuy, Payright and Zebit. In the e-commerce space, MyDeal listed at $1, raising $40m, and closed at $1.28. Peer-to-peer lenders Plenti and Wisr and wealth platform stocks MoneyMe also joined the boards.

So who performed the best so far this year?

Topping the list was neobank Douugh which came on the market through a backdoor listing using the shell of Ziptel and has performed very well since.

The worst performing IPO was Emyria which listed at 20c and is now trading at 8c.

Across the local market some of the more noteworthy IPOs were:

● 4D Medical, a biotech that detects diseases such as lung cancer.

● Aussie Broadband, which has more than 300,000 residential, small business and enterprise customers, which makes it the 5th biggest provider of NBN services.

● Little Green Pharma, a medical cannabis stock growing and exporting from WA, though the shares are down from its listing price.

● MyDeal.com.au, a furniture and garden e-commerce platform. It’s shares soared on ASX debut but have since pulled back.

Looking forward, there are still a number of ASX companies that are due to list before the end of the year.

These include: Nuix, an indexing and searching software provider; Fantastic Furniture, a bricks and mortar furniture seller; Vinomofo, an online wine merchant; and Youfoodz, a maker of prepared meal kits.

This is an edited version of an article which first appeared at https://insideinvestor.com.au/