Cobalt and cannabis put spark into IPO market
The initial public offering market has made a strong start to the year with the number of companies listing on the ASX during the first quarter of calendar 2017 more than doubling the previous corresponding period.
Capital raising platform OnMarket Bookbuilds said the median return from a first quarter float was 18.3 per cent compared with the benchmark return of 3.5 per cent, setting up strong foundations for the year ahead.
The mean 18.3 per cent return also compared favourably with a difficult first quarter for IPOs in 2016 when the mean return was a loss of 2.6 per cent.
The IPO market has made a strong start to the year with the number of companies listing during the first quarter of 2017 more than doubling. Michel Porro
OnMarket Bookbuilds chief executive Tim Eisenhauer said much of the outperformance from the first quarter was contributed by a handful of highly sought after floats.
"The rush of mining companies to float on the ASX reflects a significant turnaround from last year when few miners floated. There is now a greater investor appetite for mining sector investment," Mr Eisenhauer said.
The top performing float for the quarter was cobalt play Ardea Resources which rose 160 per cent between listing on February 9 and March 30. Another cobalt play to make its debut during the same period was Cobalt Blue Holdings which rose 25 per cent.
The market's other hot commodity was cannabis with phytochemical profiling company eSense-Lab rising 140 per cent on the back of strong support from the burgeoning pot stock community.
On the same theme, cannabis watering system manufacturer Roto-Gro International was also much higher by the end of the month, rising 105 per cent. Rotogro makes a barrel shaped hydroponic growing system that maximises plant yield and climate control while minimising energy bills and floor space.
Seasonal basis
Mr Eisenhauer said he expected investor demands for so-called pot stocks to remain strong, noting that the book build for a pot stock to be listed next week, The Hydroponics Company, had to be closed after just two hours.
There were plenty of stag profits to be had with a mean first day IPO return of 10.2 per cent and a mean first week return of 11.1 per cent.
German health tech company Lifespot Heath delivered shareholders the strongest of the stag or first day profits, closing the first day of trade 100 per cent up on the issue price.
Among the other first day pops was Winha Commerce and Trade International which rose 40 per cent, Metals Tech rising 35 per cent and both Matador Mining and United Networks rising 30 per cent on debut.
The results were strong on a seasonal basis with 26 new listings in the first quarter of 2017 compared with 12 listings in the first quarter of 2016, but represented a significant drop off from the fourth quarter of December 2016 when 39 companies were listed as part of the traditional end of year rush.
The value of capital raised also contrasted starkly. The 26 listings from this quarter raised $232.4 million during the first quarter of 2017 compared with the first quarter of 2016 where only $86.3 million was raised.
During the last quarter of 2016, a total of $3.1 billion was raised aided by the Charter Hall Long WALE REIT valued at $1.2 billion.
Looking ahead into 2017, among the big hopefuls are the Wesfarmers spin-off of Officeworks, Origin Energy's spin off its oil and gas arm Lattice Energy and the potential listing of ANZ's wealth division.
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