A turnaround in the number of Initial Public Offerings (IPOs) is expected in 2025 in line with interest rate cuts, easing inflation and improved economic conditions.
According to analysts, this confluence of positive events is expected to boost company confidence in launching IPOs, with the success of the recent Guzman y Gomez listing - GyG has surged 70% since June.
Guzman y Gomez, valued at A$3.86 billion, listed on the ASX last month, with its share price rising from the initial A$22 to A$38.20 in midday trade today.
Investor demand high, says analyst
Jarden’s head of equity capital markets Millie Horton noted that while 2024 had seen low IPO volumes, investor demand remained high after years of limited issuance.
“Investors are engaged on high-quality opportunities with strong appetite for scale issuers, where there is confidence around market liquidity,” she said.
“The majority of recent deals have traded strongly and above offer price – helping fuel confidence.”
Horton told The Australian that a strong IPO market next year hinged on rate and inflation stability.
“There are definite signs of momentum building with several larger-scale companies in preparation behind the scenes to maintain flexibility to launch an IPO once there’s more clarity around market conditions, interest rates and inflation,” she said.
She predicts the Reserve Bank of Australia (RBA) will cut rates in early 2025, which could incentivise listings, particularly in sectors such as technology, healthcare and renewable energy.
Virgin IPO
Virgin Australia is expected to revisit IPO plans next year, after previously delaying its A$3 billion valuation listing due to volatile equity markets. Bain Capital, which acquired the airline for A$700 million in 2020, had originally aimed to relist Virgin in 2023.
Horton believes Virgin is waiting for the right window and a wave of activity.
“What we typically have seen is that companies that IPO at the start of the reopening of IPO markets typically trade better than those that come at the end of the cycle,” she said.
Mining leads IPOs down
ASX data indicates a decline in listings this year, a shift attributed to rising costs and regulatory pressures, with companies increasingly turning to private markets for capital.
EQT capital raising managing director Martin Donnelly pointed out that private markets offer more flexibility than IPOs.
There have been only around 25 IPOs since January 1 this year, with a further five due this month including Merino and Co. Ltd.
All going to plan, CleanTech Lithium PLC (AIM:CTL, OTCQX:CTLHF) and Fulcrum Lithium Ltd will be the next to list on October 25.
While smaller IPOs, such as Merino & Co’s A$7.5 million offering, are on the rise, major IPOs remain scarce, with notable exceptions like Guzman y Gomez and Redox.
HLB Mann Judd partner Marcus Ohm linked the decrease in IPO activity to the mining sector, particularly in lithium and rare earth listings.