As 2019 came to a close, the last week of IPO activity threw a glimmer of hope for the new year ahead.
Trade tensions between global economies and rising geopolitical uncertainty prevailed throughout the year contributing to sluggish IPO activity and record lows for deal values.
Despite uncertainty in the market, there has been a sharp increase in the number of growth stage technology companies listing on the Australian Securities Exchange (ASX). Traditionally, the ASX has weighted towards financial services and mining companies.
However, the technology sector has dominated IPO activity with Australian start-ups such as Canva and Culture Amp being valued at a staggering $4.7 billion and $1.04 billion respectively. In 2019 technology stocks represented the highest number of new listings on the ASX, with a total of 16 technology companies with a value of over $1 billion listed on the ASX. This compares to only one such listing five years ago.
The benefits of an ASX listing seem to have been identified by domestic and international companies in recent years, attracting cross-border listings of small and mid-cap companies such as Singapore-based Osteopore Limited and US-based Sezzle Inc and the recent largest overseas technology listing of Irish insurance software company Fineos.
Over the past few years, there has also been an increase in the number of New Zealand companies that are dual listing on the ASX. New Zealand companies listing on the ASX gain access to a wider pool of capital, increased liquidity and enhanced visibility in both the markets.
Why is the ASX so attractive?
Foreign companies looking to raise capital are aware that the Australian market is well funded with major superannuation funds. Compulsory superannuation in Australia makes it one of the best sources of capital in the world. Many funds allocated to equities are mandated to invest in ASX-listed companies which appeals to foreign companies looking to raise capital.
The ASX also has a robust regulatory oversight, and companies looking for a springboard to Asia are increasingly looking to the ASX as the preferred listing choice due to Australia’s strong investor and customer base.
This article was originally published in the 2020 IPO Watch Report.