Australian initial public offerings significantly outperformed the broader sharemarket in the third quarter, with the IT sector dominating both in terms of the number of floats and returns. The 24 companies to list on the S&P/ASX 200 in the three months to September 30 averaged a 28.2 per cent return, which compares with a 3.9 per cent rise from the broader index, according to a quarterly report from OnMarket, due for release later this week.
IT listings have been the standout this year, the report shows, with 16 floats in that sector making up 28 per cent of all IPOs for the year to September 30 and averaging an impressive 46.3 per cent over the period.
Financial stocks have been the second most active, with nine floats.
Not all technology stocks to list in the September quarter were winners, however. Many investors were burned by Kogan.com, which slumped almost 17 per cent after listing at $1.80 on July 7.
Shares in the online department store have not yet recaptured their IPO price, last trading at $1.61.
Investors prepared to commit early to listing stocks didn’t need to wait long for their reward in the third quarter, with the average first-day performance for listing stocks sitting just below 18 per cent, compared with 4.1 per cent over the same period in 2015.
Most IPOs made their gains in the first week and then took their foot off the accelerator.
The mean first-day rise from listing stocks in the period was 17.9 per cent; they averaged a 28.6 per cent rise in their first week on the ASX, but averaged a slightly weaker 28.2 per cent rise over the full three months.
OnMarket chief executive Ben Bucknell says that’s not necessarily a sign profit-takers are running the show, with most retail investors taking a longer view on IPO investing.
Part of the problem in the space seems to be access for average retail investors.
5 stocks made up 83 per cent of the total capital raised for IPOs in the third quarter, but none were open to the public.
Viva Energy REIT, Michael Hill International, Propertylink Group, Scottish Pacific Group and QANTM Intellectual Property were the biggest five, but they had no allocation for retail investors.
Despite this, Mr Bucknell says investors should treat IPOs as an asset class and take a portfolio approach.
“A lot of people out there are looking at the large cashflow positive companies, thinking ‘they’re the IPOs that I want’, Mr Bucknell told The Australian.
“They might want a sprinkle of the higher risk IPOs that aren’t as far into the life-cycle of a company, but the problem is, the public doesn’t necessarily get access to the full spectrum.”
By Chris Kohler at The Australian