IPO market poised for a resurgence in 2025: ASX

Despite recent concern that the ASX is shrinking, its manager for listing has assured that after a quieter period, optimism abounds as the cyclical nature of IPO activity gears up for a resurgence in the second half of this year, with momentum carrying into 2025.

In a piece published on the ASX, Kate Galpin said: “After an extremely busy 2021 it has been relatively quiet over the past couple of years, similar to 2011–12, but the IPO market is cyclical, and activity will return”.

“Headwinds caused by uncertainty around inflation and increasing interest rates played a role in reducing the number of new listings globally last year, and ASX was no exception with some highly anticipated IPOs deferred,” Galpin said.

The ASX contracted by $55 billion last year due to shifting market dynamics, including declining IPO activity and a growing preference for private markets.

While closely monitored by the corporate regulator, superannuation funds have also voiced concerns, highlighting that the ASX’s diminishing pool of opportunities is becoming too limited for their investment strategies.

But according to Galpin, the pipeline of new listings “looks promising” into the second half of the year, including companies in the industrials, mining, and consumer discretionary sectors.

Galpin refused to say that the ASX has been shrinking, noting that, “notwithstanding that it’s been a quiet period”, an analysis of capital activity on ASX shows that there has been an increase in net capitalisation every year from 2017 to 2023.

Over the past seven years, she said, the ASX witnessed $750 billion in new capital, including listings, secondary offerings, and other raisings. This period also saw $441 billion in net new capital after factoring in AU$309 billion from delistings.

“In each and every year, there has been net capital added on to ASX, even though some years saw a net decrease in the number of listed companies,” Galpin said.

“That trend has continued in calendar year 2024 and for the five months to the end of May there’s been a net new capital of $7 billion added.”

Moreover, Galpin emphasised that the ASX continues to rank among the world’s busiest exchanges in terms of new listings volume, highlighting also that ASX-listed companies raised $26 billion in 2023, surpassing fundraising totals of both the Hong Kong and Toronto stock exchanges.

“In 2023, ASX did 45 new listings, putting us ahead of the London Stock Exchange, New York Stock Exchange, and Singapore Exchange. The current listings pipeline suggests there will be increasing ASX IPO activity as we move through 2024,” she said.

Among others, Galpin highlighted the success of Guzman y Gomez (ASX: GYG), the latest ASX IPO, which began trading on 20 June with a $2.2 billion market capitalisation after raising AU$335 million.

“It was a significant IPO for the market, the largest since the highs of 2021, and demonstrates a return of conditions where investors are willing and confident to value and support new listings,” she said.

However, Macquarie analysts warned last month that even a stronger IPO year “would not” meet the rising demand from super funds, reinvested dividends, and buybacks.

Instead, to boost supply on the ASX, Macquarie suggested leveraging the growing super pool, among other positives, to attract more global companies to list.

“One area of potential growth for equity supply on the ASX would be global companies, including those that already have a primary listing in another market,” Macquarie said.

“Due to the scarcity of opportunities, attractive equity stories often trade at a premium on the ASX.”

According to ASX data, there are 144 offshore companies listed on the ASX, with the majority from New Zealand (37 percent), followed by the US, Canada, and the UK.

Galpin agreed that the ASX is particularly appealing to growing offshore companies wanting access to capital to continue to grow.

“ASX expects market conditions to continue to improve and offers growing companies access to capital in a dynamic and growing market, at volumes above the relative size of our market.”