Small cap listings dominate IPO market

Simone Ziaziaris
(Australian Associated Press)

Smaller companies dominated the initial public offerings (IPOs) market in 2017, driving the number of new listings to its highest level in over a decade, a new report says.

New listings on the local stock exchange jumped 17 per cent to 110 in 2017, up from the prior year when 94 IPOs debuted on the ASX, and hit its highest point since 2007, according to a report by financial consultants HLB Mann Judd.

Small cap companies – those with a market capitalisation of less than $100 million – made up 80 per cent of those listings in the past year, an increase of 38 per cent over 2016’s 64 small cap listings.

Author of the report Marcus Ohm says the marked shift in the past two years towards an increasing proportion of the IPO market being made up of small cap companies has generally, been well supported by the market.

“In total, small cap companies raised $1.1 billion of the total raised for the year, or 28 per cent, compared to 11 per cent in 2016,” Mr Ohm said.

Mining stocks dominated the IPO pipeline in 2017, on the back of improved commodity prices and growing investor sentiment, and are tipped to be at the forefront for 2017.

But, Mr Ohm said technology stocks, which have been a significant contributor of new listings in recent years, have declined.

The investment sector delivered 10 listings, while the healthcare sector brought in seven listings and is expected to generate more – particularly within the medical marijuana area.

He said new listings significantly outperformed the wider market in 2017 in terms of year-end share price gains, with an average increase in share price of 46 per cent across all new IPOs, and 56 per cent within the small cap sector specifically.

“This compares favourably against the S&P/ASX200, which nonetheless recorded a solid increase of seven per cent overall,” Mr Ohm said.

“Overall, investor sentiment towards the IPO market appears reasonably healthy, with 79 per cent of IPOs meeting or exceeding their capital raising goals.”

Mr Ohm said 2018 looks to be a “healthy” year for new listings, with 37 companies having already applied for listing so far, up 61 per cent over the start of 2017.

“Materials and technology stocks make up the bulk of the proposed listings, with nine and eight listings respectively,” Mr Ohm said.

“Overall, the pipeline appears to be relatively healthy, and reflective of improved market conditions and investor sentiment.”


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