The number of companies going public in Australia has reached its lowest level since the global financial crisis 15 years ago, with a Mexican fast-food chain becoming the largest listing in a market previously active with new mining and energy stocks.
As of 2024, the Australian stock exchange has seen only 12 initial public offerings (IPOs), raising a mere $371 million, according to data from LSEG. This is the lowest year-to-date figure since 2009 and only about a quarter of the historic average since the turn of the century.
This decline is partly attributed to Australia’s uncertain economic outlook, with growth faltering and interest rates remaining high to combat persistent inflation. Additionally, fierce competition from private capital for assets, exemplified by Blackstone’s A$24 billion (US$16 billion) acquisition of former IPO candidate AirTrunk, has also been a factor.
Larger companies have postponed potential IPOs, awaiting more stable conditions, according to Marcus Ohm, a partner at HLB Mann Judd, which compiles an annual report on Australia’s new listings market. Ohm mentioned that there is no certainty on valuations, describing the market as cyclical with a current “wait and see” mentality.
The only significant listing this year has been the burrito chain Guzman y Gomez, which raised A$335 million at a valuation of A$2.2 billion in June. Founded by New Yorkers Steven Marks, a former hedge fund employee at SAC Capital, and Robert Hazan, the chain identified an opportunity in the Australian fast-food market in 2006. The company’s market capitalisation has surged to A$4 billion, driven by investor confidence in its growth plans, spurring other companies to reconsider their IPO strategies.
Western Australia’s Good Earth Dairy is anticipated to launch an IPO, aiming to raise A$20 million to produce ice cream and baby formula from wild camels’ milk, known for fewer allergens and potential export markets in China and the Middle East, according to CEO Marcel Steingiesser.
Nevertheless, the Australian Securities Exchange (ASX) needs a more robust pipeline of larger companies to sustain the momentum initiated by Guzman y Gomez’s successful listing, especially given the current high levels of the ASX benchmark index and the significant demand for investable assets from institutions like Australia’s A$4 trillion pension fund sector.
James Posnett, the general manager of listings at ASX, stated that the demand from institutional investors is louder than ever. Evidence of strong investor appetite is also seen in capital raising by listed companies, such as NextDC, which raised A$2.7 billion in the past 18 months.
The usual steady inflow of small-cap mining listings has slowed due to a drop in commodity prices, including lithium. However, CleanTech Lithium, operating in Chile and already listed on London’s AIM market, plans to raise up to A$20 million through a secondary listing.
Rob Jahrling, head of equity capital markets at Citigroup in Sydney, noted that investors are eager for the IPO market to reopen, following the delisting of large Australian companies, including technology company Altium, in recent years. Jahrling mentioned that the listing universe has shrunk due to a lack of new IPOs.
Larger listings are anticipated to resume later in the year or in early 2025, involving companies that have postponed their IPOs due to market conditions. Notable companies like payment company Cuscal, partially owned by Mastercard, and airline Virgin Australia, owned by Bain Capital, are expected to revive their IPO plans.
Karen Chan, a fund manager at Perennial Private Investors, stated that Guzman y Gomez’s strong performance has attracted shareholders seeking brands with global potential. The IPO pathway is now a viable option, with demand for high-quality companies.
Jahrling emphasized that Guzman y Gomez’s success offers a model and confidence for other companies, though competition from venture capital, infrastructure funds, and pension funds is likely to persist, as demonstrated by the case with AirTrunk.
