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  • 11 February 2020

We are happy to present our quarterly review of the mid-market IPOs on the ASX.

The focus of the analysis is on the current quarter and the immediately preceding 12 months with the aim of providing you with an overview of the current mid-market IPO activity.

In our analysis we have looked at IPOs that had an enterprise value of less than $200m at the time of listing. We have also provided some further detail on the cost of IPOs broken down by market capitalisation and the performance of IPOs occurring in the last twelve months by significant sectors.

Key highlights are:

  • There were 14 IPOs for mid-market companies in the quarter, an increase on last quarter and decrease on the same period last year.
  • The mining sector was the most active in the quarter with four IPOs.
  • Mid-market companies raised $322.9m on the ASX in the quarter 
  • The average IPO fundraising was $23.1m, which is a 141% increase on the previous quarter, and a 17% increase on the 12-month average.
  • On average, transaction costs (excluding brokerage fees) over the last 12 months increased by 42% to $448k 

Overview

There were 14 IPOs of the mid-market this quarter, a 180% increase from last quarter and a 30% decrease compared to the same quarter last year.

Total funds raised for the quarter was $322.9m, which is a 784% increase from last quarter, and a 150% increase when compared to the same period last year. The average funds raised per transaction this quarter increased by 195% from $9.6m last quarter to $28.2m, and when compared to the same period last year increased by 233%. This quarter has seen the 12-month average funds raised per transaction decrease by 13%.

The average enterprise value at IPO in the quarter was $80.0m, which was up 26% from last quarter and up 128% from the same quarter last year.

 

Quarterly Activity

Of the 14 IPOs in the quarter, the mining sector was the most active with four IPO’s recorded, followed by financials with three IPOs. Industrials, consumer staples and information technology sectors had two IPOs each this quarter. There were no IPOs in the quarter for the utilities, telecommunication and real estate sectors.

Of the $322.9m raised during the quarter, financials recorded the highest value of funds raised, raising $95.0m, followed by the consumer staples sector with $64.4m raised and information technology with $50.9m raised.  These three industries accounted for 65% of the total funds raised during the quarter.

The following graph shows total funds raised by sector in Q2 2020.

Sectors

We have analysed the number of IPOs and average fund raising per sector over the last 12 months, in order to better understand the activity in each sector.

Although the mining related sector was one the most active sectors over the last 12 months, with eight IPOs, the average funds raised was the lowest of all sectors at only $7.7m per IPO. 

The sector with the highest average gross proceeds raised is the financials, raising an average of $39.7m for six IPOs in the last 12 months.

Information Technology has also experienced strong activity with six IPOs completed over the last 12 months, raising an average of $27.5m per IPO.  

Performance over the last 12 months

There were no mid-market IPOs in the utilities and real estate sectors in the last 12 months and only one transaction in communication services, which is excluded from this analysis.  

Consumer discretionary was the most volatile sector, with a spread of returns of 191%.

Consumer discretionary IPOs were the best performing over the last 12 months with an average return of 73%, followed by the industrials sector with an average return of 21%. The financials, consumer staples, health care and mining relates sectors where all volatile with the average return being negative for the last twelve months.

Costs

Certain costs in undertaking an IPO, being accounting and legal costs, are typically fixed regardless of the outcome. Fundraising costs, on the other hand, are generally paid on successful completion of the IPO and represent a percentage of proceeds raised. Accordingly, fundraising costs have been excluded from our analysis.

A number of factors will impact the costs incurred, including how prepared the company is for the IPO, the complexity of its business and whether there are any related transactions. Over the last year, the fixed costs for an IPO have averaged $447.9k compared to $314.9k for the corresponding 12-month period in the prior year.


Methodology

The analysis was prepared based on data sourced from S&P Capital IQ. Data analysed is for completed IPOs on the ASX, from 1 July 2017 to 31 December 2019, with an implied enterprise value of less than $200m. If no implied enterprise value was disclosed at the IPO filling date, transactions were adjusted to be the first enterprise value disclosed within the preceding 90 days.  

Of the 35 transactions analysed for transaction costs there was sufficient data for 17% of the transactions to calculate the average accounting fees per transaction and there was sufficient data for 69% of the transactions to calculate the average wlegal fees per transaction.

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