24 January 2020 @ 12:00AM
A record year for the ASX 200 still wasn’t enough to beat the average IPO return for 2019, outperformed by 16.8% at the end of the year. In 2019 IPOs returned an average of 35.2% at December 31 to mark the fourth time in five years that the IPO market has produced better returns than the benchmark ASX 200 index.
2019 again supported the thesis that IPOs are systemically under-priced versus the trading prices in the secondary market. A model portfolio created by: (a) investing the same amount into every IPO in 2019; and (b) selling every investment 3 months post listing, delivered investors a simple money weighted annualised return of 157.7%
The OnMarket 2019 IPO Report which details Australian Initial Public Offering activity for 2019, includes performance methodology that measures each IPO for the same period post listing. This provides a truer reflection of IPO performance opposed to measuring performance at December 31 when some IPOs have been listed for almost 12 months and others not yet 1 month.
The number of IPOs in 2019 was 63 which was down on previous years. This resulted in the total amount of IPO capital raised in Australia being $5.4b for the year.
2019 Top 10 IPO Performers at December 31
In 2019 the average IPO was 24.1% higher at the close of the first day than the issue price. 3D printed bioresorbable implant manufacturer Osteopore (ASX:OSX) had the highest 1-day return at 262.5%. Holding onto your IPO shares for a longer period post-listing was a winning strategy in 2019 with an average return of 27.5% 1-month after listing and a considerable 39.8% return when sold 3 months after listing. Buy now, pay later solution Splitit Payments (ASX:SPT) was the perfect example of this, with a 1-day return of 90% before rocketing to a 3-month return of 437.5%.
Technology companies were once again hot on the ASX, with the 22 technology companies accounting for over one third of all new listings in 2019. Internet service provider Uniti Wireless (ASX:UWL) produced the highest return at December 31 up 530% followed by 3D printed bioresorbable implant producer Osteopore (ASX:OSX) at 265%.
The buy now, pay later solutions trend continued to grow with Splitit (ASX:SPT), Sezzle (ASX:SZL) and Openpay (ASX:OPY) listing in 2019 joining Afterpay (ASX:APT) and ZipPay (ASX:Z1P) on the ASX. The BNPL solutions are trending for investors with the 3 new listings returning an average of 51% after 1 day and finishing the year up 93.1%. Much of this gain came from Splitit Payments with an end of year return of 230%. Openpay finished the year down 21.9% indicating that this sub sector may already have too many players.
Companies with exposure to Chinese consumers once again performed well in 2019. Retail outlet Mediland Pharm (ASX:MPH) had a 3 month return of 75% before finishing the year up 37.5%. Goat milk product manufacturer Nuchev (ASX:NUC) listed in December and had returned 38.5% at December 31.
23 companies from the financials and real estate sectors listed on ASX, this was made up of 11 LICs, LITs and REITs contributing 55.1% or $3.0b, of the funds raised. Pengana Private Equity Trust (ASX:PE1) was the strongest performer of the group returning 24% at December 31. The confidence surrounding financials led to VGI Partners Ltd (ASX:VGI) (143% return at Dec 31) also coming to market with VGI Partners Asian Investments (ASX:VG8). The two listings combined to raise 631.5m.