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IPOs in 2020: A strong start to the year already

  • February 23, 2020 09:15 AM AEDT
  • Hina Chowdhary
    Director, Equities Research Hina Chowdhary
    1490 Posts

    Hina Chowdhary is the Director, Equity Research at Kalkine and has an extensive experience of about 15 years in the area of Research, which includes 5+ years in Equities Research particularly.She has earned a Master of Science degree from the renowne...

IPOs in 2020: A strong start to the year already

The overarching desire to bask in the glory of the growing organisation might appear realisable as you come across the appealing opportunity to be a part of the private organisation. Your ambitious investment dreams soar high as you daydream about metaphorically standing next to the initial investors of companies like Walt Disney, Wesfarmers or top-notch tech companies. Or maybe in your imaginations, you might be visualising yourself as another Warren Buffet. Such high aspirations, coupled with the business opportunities in Australia, have together catapulted the substantial rise in the Initial Public Offerings (IPO).

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Standing in the initial months of the new year, as we find ourselves vehemently wrapped with our full year’s plan, the IPO market in Australia seems to be brimming with exorbitant energy. While the investors look to vigorously enhance their investment profitability, the companies driven by their capital raising needs to bolster the growth of the IPOs. The mutual symbiosis of the investors and the companies in the Australian economy has led to shares float in the Australian economy.

Why is Australia mushrooming with IPOs?

The technological enhancements alongside the focus on the development of new businesses are together reaping out a large number of entrepreneurs in the Australian economy. The culturally diverse and multilingual nation having around 40% of the workforce with tertiary qualification rank 5 in the world concerning global entrepreneurship.

Source: RBA

Australia the 14th largest economy, annually witnessing the enhancing economic growth for 28 years in a row, is forecasted to achieve an average GDP growth of 2.75 percent in the upcoming five years. Furthermore, being loaded with the richest resource deposit of gold, iron ore and uranium makes Australia the lucrative destination for businesses.

Recent Floats in the Australian Market

The beginning of 2020 witnessed many companies going public in Australia. As per the ASX, till date 13 companies have been listed on the Australian Stock Exchange. The recent IPOs encompasses diverse industries such as Healthcare, IT, etc whereas the Metals and Mining companies prominently dominated the initial offerings. The Innovative market opportunities affecting the operational processes have fuelled the growth of the new ventures seeking capital to expand.

Metals and Mining Sector

The metal and mining companies such as Castile Resources Ltd. and Cobre Limited issued their Initial Public Offerings in 2020.

Cobre Limited (ASX: CBE) which was listed on 31 January 2020 issued its first share at issue price of $0.20. Cobre is the Australia based Resource exploration company that looks for VMS deposits. The project portfolio of the company includes Perrinvale Project. The Perrinvale lies in the Panhandle Greenstone Belt of Western Australia and the Sandiman Project.

The primary purpose of the fundraising was to fund the existing project exploration programs and provide Cobre with the working capital for meeting the corporate and administrative cost. At the end of the trading session on 21 February 2020, the shares closed at $0.270, up by 3.846%.

Castile Resource Limited (ASX: CST) went public on 14 February 2020 with the issue price of $0.20. The company has invested in the exploration of Copper, Gold and other associated base metals through its two projects called Rover Project and Warumpi Project. The company proposed that the raised capital would be utilised towards the project exploration, acquisition cost and general working capital. Notably, CST closed at $0.185 per share, up by 5.714% intraday on 21 February 2020.

Health Care Sector

Australia also witnessed a listing of the healthcare companies in the new year. Nyrada Inc., Emerald Clinics Limited and Little Green Pharma Limited were the healthcare companies that decided to go public in 2020.

Nyrada Inc. (ASX: NYR), a drug development company at its preclinical stage issued IPO at the price of $0.20 per share.

The healthcare technology and services company, Emerald Clinics Limited (ASX: EMD) joined the bandwagon of the companies issuing IPO in Australia as it got listed on ASX on 12 February 2020 with the issue price of $0.20. EMD stock last traded at $0.135, up by 12.5% Intraday on 21 February 2020.

Little Green Pharma Ltd (ASX: LGP) that went public on 20 February 2020 at the issue price of $0.40 is the pioneer in medical cannabis products. The company stock closed at $0.460 with the market capitalisation of $46.73 million on 21 February 2020.

Information Technology Stocks

The information technology stocks have also made their advancements concerning the IPO offerings in 2020 through Cosol Limited and Thedocyard Limited.

Cosol Limited (ASX: COS) prominently engaged in the optimisation of the business processes through the IT solution got listed on ASX on 24 January 2020 with the issue price of $0.20. The shares last traded on 21 February 2020 at $0.340.

Thedocyard Limited (ASX: TDY) that delivers Workflow and project management solutions issued the shares on 14 February at the issue price of $0.20. The company with the market capitalisation of $26.55 million traded at $0.210 on 21 February 2020.

Upcoming ASX Floats

While many of the private companies have divulged in the IPO offerings, many organisations are lined up for the listing in the forthcoming days. ARMnet Limited, Kaiser Reef Limited, Metal Hawk Limited and Tartana Resources Limited have geared their workings towards the first public offerings. The upcoming floats are also predominantly inclined towards the mining and resource exploration area.

Bottomline

The Australian market has reckoned several IPOs since the beginning of the new year. While the number of IPOs mainly are in the mining and exploration sector, it also opens avenues for both investors and business, the future performance depends upon varying market forces. The Bushfire aftereffects and the ongoing Coronavirus could likely generate uncertainty among the investors that could send a shocking wave to the IPO stocks.


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