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 39 IPOs for mid-market companies in the quarter, a significant increase on last quarter and on the same period last year, as the market continues to bounce back after COVID-19
- The mining related sectors were the most active sectors in the quarter with 26 IPOs
- Mid-market companies raised $869.2 million on the ASX in the quarter
- The average IPO fundraising was $22.3 million, which is a 30% increase on the previous quarter, and a 13% increase on the 12-month average
- On average, transaction costs (excluding brokerage fees) decreased slightly by 4.5% to $0.38 million
Total funds raised in the quarter were $870 million, a 462% increase from last quarter, and a 169% increase compared to the corresponding period in the previous year. The average funds raised per transaction this quarter increase by 30% from $17.2 million last quarter to $22.3 million, however, it decreased by 3% when compared to Q2 FY2020. This quarter has seen the 12-month average funds raised per transaction increase by 13%.
Regarding the enterprise value of each listed company, the average enterprise value at IPO in the quarter was $59.2 million, which was down 25% from last quarter and 25% from the corresponding period last year.
There were 20 IPOs within mining related sectors, followed by 4 IPOs within consumer discretionary, consumer staples, and healthcare sectors, 3 IPOs in the industrials sector, 2 each in the information technology and communications sectors, and 1 IPO in the financial sector. There were no IPOs this quarter in the real estate and utilities sectors.
Of the $870 million raised during the quarter, the healthcare sector recorded the highest value of funds raised, raising $203.8 million, followed by consumer discretionary which raised $200 million and consumer staples which raised $114 million.
We have analysed the number of IPOs and average fund raising per sector over the last quarter in order to better understand the activity in each sector.
Mining related sectors were the most active sectors with 20 IPOs, however, the average funds raised was the lowest of all sectors, raising an average of $7.35 million per transaction.
Within the consumer discretionary sector, there were only 4 IPOs over the quarter however the average funds raised was the highest of all sectors at $50 million per transaction, followed by the Telecommunications sector which had 2 IPOs raising an average of $40 million per transaction.
The healthcare, industrials and consumer staples sectors had average funds raised of between $22 million and $29 million, and the financials and information technology sectors raised an average of between $15 million and $18 million over the quarter.
There were no mid-market IPOs in the utilities and real estate sectors during the quarter.
Mining related sectors were the most volatile sectors with a spread of returns of 213% and positive average returns of 10%.
All other sectors where volatile with negative average returns, reflecting the current market conditions, except the industrials, communications and healthcare sectors which had positive average returns.
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 $383,057 compared to $401,236 for the corresponding 12-month period in the prior year.
The analysis was prepared based on data sourced from S&P Capital IQ. Data analysed is for completed IPOs on the ASX, from 1 October 2020 to 31 December 2020, 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 39 transactions analysed for transaction costs there was sufficient data for 100% of the transactions to calculate the average accounting fees per transaction and there was sufficient data for 100% of the transactions to calculate the average legal fees per transaction.
If you would like to discuss further any of the information provided in this report and how it may impact you, please contact your Nexia Advisor.