The number of companies going public in Australia has hit its lowest point since the global financial crisis 15 years ago, with a Mexican fast-food chain standing out as the largest listing in a market once dominated by new mining and energy stocks.
So far in 2024, just 12 initial public offerings (IPOs) have taken place on the Australian stock exchange, raising a mere $371 million, according to data from LSEG. This is the lowest year-to-date figure since 2009 and only a quarter of the historical average since the start of the century.
One major factor behind this drop is Australia's uncertain economic outlook, with growth slowing and interest rates remaining high to combat inflation. Additionally, fierce competition from private capital, highlighted by Blackstone's A$24 billion (US$16 billion) takeover of AirTrunk—once a potential IPO candidate—has further reduced the number of listings.
Larger companies are delaying their IPOs, waiting for more stable conditions, according to Marcus Ohm, a partner at HLB Mann Judd. “There’s no certainty on valuation,” he noted, adding that a “wait and see” mentality has set in across the market.
The most significant listing this year has been Guzman y Gomez, a burrito chain, which raised A$335 million in June, valuing the company at A$2.2 billion. Founded by New Yorkers Steven Marks and Robert Hazan in 2006, the chain has rapidly gained investor confidence, and its market capitalization has since risen to A$4 billion.
Smaller IPOs, such as Good Earth Dairy, which plans to turn wild camel milk into ice cream and baby formula, are also in the pipeline. Having postponed listings in 2020 and 2022, the company is now in talks to raise A$20 million to bring its products, particularly those aimed at markets in China and the Middle East, to a global audience.
Despite the rise in Australian equity markets, with the ASX benchmark index hitting record highs, the number of IPOs remains surprisingly low. This comes amid strong demand for investable assets from institutions like Australia’s A$4 trillion pension fund sector. Guzman y Gomez’s successful IPO was supported by Aware Super, Australia’s third-largest pension fund.
James Posnett, ASX's general manager of listings, said institutional investor demand is "the loudest it has been" in his 12 years with the exchange. He pointed to capital raising by listed companies like data centre firm NextDC, which has raised A$2.7 billion in the past 18 months, as a sign of healthy investor appetite.
The usual flow of small-cap mining listings has been slowed by declining commodity prices, particularly lithium. However, CleanTech Lithium, a Chilean company already listed on London’s AIM market, is planning a secondary listing in Australia, aiming to raise up to A$20 million.
Rob Jahrling, head of equity capital markets at Citigroup in Sydney, noted that both institutional and retail investors are eager for the IPO market to reopen after a wave of takeovers and delistings. "There’s not enough listings to redeploy that capital," he said. "The universe has shrunk."
Significant IPO activity is not expected to pick up until late 2024 or early 2025, with payments company Cuscal, partially owned by Mastercard, and Virgin Australia, owned by Bain Capital, likely to revive their IPO plans by then.
The success of Guzman y Gomez has piqued the interest of shareholders, according to Karen Chan of Perennial Private Investors, who said, “The IPO option is now on the table.” Jahrling added that Guzman y Gomez’s performance has provided a “blueprint and confidence” for other companies considering going public. However, he cautioned that competition from private capital will remain fierce, as demonstrated by the AirTrunk deal, and is unlikely to disappear anytime soon.
