POWERED BY MOMENTUM MEDIA
IPO window forecasted for 2013
A window for initial public offerings (IPOs) will open up in 2013 but institutional investors will set the bar high for the first IPOs of the cycle, a global survey has found.
Ernst and Young surveyed more than 300 institutional investors from around the world including Australia, and found attractive pricing (91 per cent), a compelling equity story (65 per cent) and confidence in management (57 per cent) were the top three reasons for investing in an IPO.
Ernst & Young Oceania transactions advisory leader Graeme Browing said there was increasing confidence that the IPO window would open in Australia this year.
He forecasted a small number of IPOs to appear in Australia before mid-year, with a bigger window opening up in October and November, granted equity markets and the economic outlook remained stable.
"While history suggests there could be a pull-back at some point in the strong equity market run we have seen in the past nine months, the growing confidence in the global economic outlook, reinforced by a solid earnings season during February, is conducive to the IPO window opening," Browing said.
The survey found brighter corporate earnings outlook (64 per cent), stabilisation in macroeconomic conditions (52 per cent), and stabilisation in equity markets (47 per cent) would improve market sentiment for IPOs.
But the first companies to test the market would need to be "well-priced, well-prepared and able to demonstrate a predictable earnings stream", Browning said.
Institutional investors indicated the most important financial factors for assessing an IPO were earnings ratio (45 per cent), cash flow (42 per cent) and ROE (18 per cent), while the most important non-financial factors were management credibility and experience (30 per cent), market size and opportunity (26 per cent) and brand strength/market position (20 per cent).
Investors said the most important infrastructure factors for companies preparing to go public were the financial reporting system (80 per cent), corporate governance and compliance (79 per cent) and risk management and internal controls (71 per cent).
The main concerns investors had about IPO candidates were overpricing of stock at IPO (85 per cent), the issuer not having the right management (56 per cent) and listing too early in a company's life cycle (43 per cent).
Last December Ernst & Young said there had been 36 IPOs to the end of November raising total capital of US$865 million — down 63 per cent in volume and 29 per cent in value compared to 2011. It expected no significant listings in December.
AUTHOR
Staff Writer
Money Management staff writers are writers who contribute to the website from time to time. If you would like to discuss the content contained within this article please contact us.
Recommended for you
Demand from institutional investors was the main driver of growth in Australia’s responsible investment (RI) market in 2023, as the industry continued to gain momentum.
Institutional investors have entered November with their largest pre-election equity allocation in two decades, according to new data.
The sovereign wealth fund remains cautious of the impact of high inflation as it announces a strong return in its latest update.
Australia is becoming increasingly recognised as an attractive investment opportunity against global counterparts, recent analysis has found.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.56 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
31.06 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.81 3 y p.a(%)
