The year 2017 was an exceptionally strong one for Australian companies floating on the Australian Securities Exchange, according to a new report which reveals that IPOs during the year returned an average of 61.6% from listing.
The report, from crowdfunding app OnMarket, says the return from IPOs achieved by businesses was an impressive 54.6% outperformance of the benchmark S&P/ASX 200 index, which had a solid 7.0% return in 2017.
OnMarket says the number of IPO listings in 2017 rose to 113 (96 in 2016, 85 in 2015), implying an average of almost 10 a month – and IPOs of less than $50 million were, on average, up 69.8% at 31 December.
Key data findings of the OnMarket report include:
- The number of IPOs has steadily increased over the past three years, yet the total market capitalisation of listings has decreased, indicating a surge in small-cap listings in the market and an overshadowing of larger IPOs.
- Smaller IPOs have consistently returned more to investors than traditional, larger IPOs, with IPOs that issued less than $50 million outperforming those that issued more than $50 million by 46.3% in 2017.
The top performing IPOs for 2017 were:
- Ardea Resources (ASX: ARL) – listed in February 2017, as a spinoff of Heron Resources, and raised $5.1 million at $0.20 per share. At the time of the prospectus, gold was the focus, but such have been the developments in cobalt that ARL has been transformed to focus on cobalt. 850% return in 2017.
- Wattle Health Australia (ASX: WHA) – listed in March 2017, raising $8.0 million at $0.20 per share. In 2017, the infant formula group’s share price rose 815% from its listing date to 31 December.
- Cann Group (ASX: CAN) – listed on the ASX in Q2, raising $13.5 million at $0.30 per share. CAN returned 813.3% by year-end. It was the first Australian company to secure the necessary licences to undertake research and to cultivate cannabis for human medicinal purposes.
- The largest three floats in 2017 were all LICs. The largest listing, Magellan Global Trust (ASX: MGG), came to market in October and alone raised $1.5 billion of the total $6 billion of all IPOs in 2017.
- Netwealth Group (ASX: NWL) ended the year crowned as the IPO with the greatest market cap, having gained 96.8% by year-end following its 43.8% first day rise.
According to OnMarket, one of the most interesting sector trends in 2017 was the number of medicinal cannabis stocks to list on ASX.
In total, there were six medicinal cannabis companies to list on the ASX in 2017, with two — Cann Group (ASX: CAN) and The Hydroponics Company (ASX: THC) — part of the top 10 performers for the year with an 813.3% and 240.0% return respectively at year-end.
OnMarket chief executive Ben Bucknell said, “In last year’s 2016 IPO report, we noted the outperformance of smaller IPOs over large IPOs and we forecasted a strong year ahead. This prediction proved to be correct with the trend continuing in 2017 with IPOs raising less than $50 million returning 69.8% to investors.
“Most institutional investors are not permitted to invest in smaller IPOs which means that there is room for self-directed investors to access returns. OnMarket was able to offer more than one in three ASX IPOs to retail investors in 2017. Our aim in 2018 will continue to be delivering capital to companies and outperformance for self-directed investors.”