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The Australian market is experiencing its lowest number of initial public offerings (IPOs) since the global financial crisis 15 years ago, pivoting away from its previous influx of mining and energy stocks. In 2024, only 12 IPOs have been recorded on the Australian stock exchange, generating $371 million, a historic low since 2009 and only a quarter of the average seen since the turn of the century, according to data from LSEG.
The downturn is attributed in part to Australia’s unpredictable economic landscape, marked by faltering growth and sustained high interest rates aimed at curbing persistent inflation. Additionally, intense competition from private capital for assets has influenced the reduction in IPOs, illustrated by Blackstone’s recent $16 billion takeover of former IPO candidate AirTrunk.
Marcus Ohm, a partner at HLB Mann Judd, noted that larger companies are postponing potential IPOs in anticipation of more stable conditions. He cited concerns over valuation certainty, highlighting the cyclical nature of the market and the prevailing ‘wait and see’ approach.
The notable listing this year has been the Mexican fast-food chain Guzman y Gomez, which raised A$335 million with a valuation of A$2.2 billion in June. Founded by New Yorkers Steven Marks, formerly of SAC Capital, and Robert Hazan in 2006, the company has quickly grown, reaching a market capitalization of A$4 billion. This success has spurred other companies to reconsider their listings.
Western Australia’s Good Earth Dairy is planning an esoteric IPO, aiming to raise A$20 million to commercialize camel’s milk for uses such as ice cream and baby formula, citing its lower allergen content as an advantage for exports to China and the Middle East.
Despite these developments, the Australian Securities Exchange (ASX) needs a more substantial pipeline of large companies to follow Guzman y Gomez’s example. This lack of IPOs stands in contrast to the surging Australian equity markets, with the ASX benchmark index reaching record highs.
Institutional demand for investable assets remains robust, as demonstrated by Australia’s A$4 trillion pension fund sector, with Aware Super, the third-largest, acting as a cornerstone investor for Guzman y Gomez. James Posnett, ASX’s General Manager of Listings, commented on the strong institutional demand and the significant capital raising by listed companies such as NextDC.
Nevertheless, the usual flow of small-cap mining listings has slowed due to declining commodity prices, though CleanTech Lithium plans a secondary listing to raise up to A$20 million. Rob Jahrling of Citigroup noted the appetite from investors for the IPO market’s reopening, reflecting a reduced universe of investment opportunities after several significant delistings in recent years.
Significant market activity is anticipated later in 2024 or early 2025, particularly from companies that had previously halted floats. Cuscal, partially owned by Mastercard, and Virgin Australia, owned by Bain Capital, are among those expected to revive IPO plans by the year’s end.
Karen Chan of Perennial Private Investors observed that Guzman y Gomez’s strong performance had spurred interest in brands with global potential, indicating a renewed demand for high-quality companies. Jahrling added that the chain’s success offers a blueprint for other companies, yet he acknowledged ongoing competition from venture capital, infrastructure, and pension funds for high-growth investments.