A look back at the IPOs of 2016
Now that 2016 is over we can take a look back at the success (or otherwise) of some of the big Initial Public Offerings (IPOs) of 2016. IPO is the market terminology for the process of taking a company public (IPO can also be referred to as a ‘float’ or ‘listing’). In other words, a private company is either partially or fully sold to investors, and listed on the ASX, thus making it a public company. Obviously this is a simplified description but it captures the essence of the transition. There are many reasons why a company might want to ‘go public’, for example, the original founders may want to list the company to realise some or all of the value from their investment or the company may simply wish to provide owners with a more liquid and transparent market in which to trade shares.
Having briefly explained what an IPO is, we can now take a look at some of the IPOs of 2016. In May of 2016, independent graphic designer marketplace Redbubble (RBL) listed at an IPO price of $1.33. Things were looking good for the stock after the first day of trading with the stock closing 9% higher on the day. Unfortunately for investors, the price slid from that day on with the current price of $0.89 near its all-time low of $0.82. It was a similar story for online retailer Kogan (KGN) which listed in July at a price of $1.80. Despite the fact that the IPO was oversubscribed by around four times, the shares closed the first day of trading at $1.50, a 16% decrease on the IPO price. Although KGN managed to rally throughout August, it never made it back to its IPO price. With the current price around $1.35, KGN investors are surely disappointed with the stock’s performance so far.
Not all intended IPOs actually made it to market last year. In an extremely rare move, the ASX blocked the IPO of music streaming company Guvera. The company was teetering on the edge of solvency and needed the IPO money to pay back creditors and many market professionals were extremely critical of the company and its management. The ASX didn’t reveal the specific reasons for denying the IPO but it is almost certainly related to it not satisfying the minimum listing requirements set by the ASX.
Later in the year, in early November, well known chicken products supplier Inghams (ING) listed its shares at a price of $3.15 and unlike the above-mentioned companies, its current share price of $3.20 is above the listing price. The offering price of the IPO was initially set at $4.14 but had to be revised down to $3.15 amid concern that there wouldn’t be sufficient investor interest at the higher price. The trading of ING since the IPO suggests that decreasing the IPO price was the right move. Inghams was owned by private equity firm TPG which sold 40% of its stake via the IPO. In the first quarter of 2017, TPG is planning to sell another company it owns, Alinta Energy, in what could be the largest ASX IPO for the year with the company likely to be valued at somewhere between $4 and $5bn.
The listing of the Charter Hall Long WALE REIT (CLW) was not a smooth process by any measure. The investment trust contains a portfolio of commercial properties that offer investors stable rental income from long term lease contracts. An initial attempt to list was pulled at the last minute due to insufficient investor interest. Charter Hall was forced to go back to the drawing board and come up with revised terms for the offer which included reducing the overall size of the offer. A few weeks later new offering terms were released and the company proceeded with the float. With an issue price of $4.00 the stock initially dropped around $0.35 during the first few weeks of trading but has subsequently recovered to now be trading right around the IPO price. Not a terrible result but perhaps a little lacklustre.
Obviously the examples described here only represent a small fraction of the total number of ASX IPOs for 2016 with many others proving to be very successful although overall 2016 was probably considered to be a disappointing IPO year. Some IPOs were delayed as a result of the uncertainty surrounding the US election and therefore these companies will be looking to list this year. This is part of the reason that the current year is set to be a big year for IPOs with a reasonable backlog of companies waiting to list including the already mentioned Alinta Energy as well as Western Power and Crown Resorts REIT. Rivkin keeps members informed of the biggest IPOs as they happen and can often get allocations for members. Readers interested in becoming a Rivkin member should contact us at 1300 366 145.
article was written by William O'Loughlin - Local Investment Analyst, Rivkin
Securities Pty Ltd. Enquiries can be made via email@example.com
or by phoning +612 8302 3600.