Australia’s revival in initial public offerings is proving short-lived as investors balk at buying new shares in one of the developed world’s worst-performing markets.
First-time share sales raised A$2.9 billion ($2.2 billion) this year, compared with A$5.2 billion in the first six months of 2014, data compiled by Bloomberg show. Greenstone Ltd. last week scrapped what could have been the year’s biggest IPO, with the insurance distributor saying it couldn’t get an acceptable valuation. MYOB Group Ltd., the most valuable company to list in 2015, fell 6 percent from its offer price through Tuesday.
Australian firms are putting off equity offerings as the nation’s benchmark index heads for a 5 percent slide this quarter, one of the worst performances among 24 developed markets tracked by Bloomberg. Foreign money managers have another incentive to stay away: they’ve already seen the nation’s currency weaken 17 percent in the past 12 months, and it’s forecast to fall another 4.2 percent by year-end.
“We’ve had a pretty aggressive selloff, and investors don’t want to put more money into something if they’re not sure whether the market pulls back further,” said Karl Goody, who helps oversee A$10 billion as a private wealth manager at Shaw Stockbroking Ltd. in Sydney. “Institutional money from overseas that often gets involved in a lot of these IPOs aren’t keen to do much at the moment with the falling Aussie dollar.”
Greenstone, IVE Group
Greenstone’s owners, including South Africa’s Hollard Insurance Co. and management, on June 10 scrapped a planned share sale that would have raised as much as A$984 million. Grocer Metcash Ltd. this week opted to sell its auto division to a rival rather than pursue a proposed IPO.
Printer and marketing company IVE Group last week canceled its IPO of as much as A$112 million due to market conditions, according to people with knowledge of the matter, who asked not to be identified as the information is private. IVE Group chairman Geoff Selig didn’t return a call seeking comment.
“Investors have more choice when the market has pulled back a bit, so if you are going to market an IPO in this environment, it has to be an attractive business model that represents fair value for investors,” said Simon Cox, head of equity capital markets for Australia at UBS Group AG. “A couple of deals falling over though doesn’t mean the IPO window is closing for the whole market.”
First-time share sales in China since Dec. 31 tripled from a year earlier to $17.1 billion through Tuesday, according to data compiled by Bloomberg. The amount of money raised in IPOs in Hong Kong rose 34 percent to $12.7 billion, while the U.S. figure fell 38 percent to $17.3 billion.
The largest Australian IPO this year was the A$833 million raised by software company MYOB, which is backed by buyout firm Bain Capital. The deal will be followed by Argo Global Listed Infrastructure Ltd., which is seeking to raise as much as A$500 million in its share sale this month.
Gateway Lifestyle Group, a provider of residential parks for the elderly, added 1 percent through Wednesday since it started trading last week after raising A$381 million. Adairs Ltd., a retailer of sheets and towels, surged 10 percent on its trading debut Wednesday in Sydney after raising A$218 million.
First-time equity raisings in Australia last year were dominated by the A$5.7 billion government privatization of health insurer Medibank Private Ltd. and the A$2.3 billion listing of private equity-owned hospital operator Healthscope Ltd. The A$17.4 billion raised last year was the most since at least 1993, according to data compiled by Bloomberg.
Credit Suisse Group AG expects market volatility to lessen in the second half, encouraging more companies to raise money, said Hasan Tevfik, Sydney-based strategist at the Swiss bank.
“Volatility is always scary for people looking to issue equity,” Tevfik said by phone. “The market will move higher by year’s end. You definitely see more IPOs in a rising market.”