Flurry of new listings provide welcome fillip
The flurry of new listings on the JSE — including the spectacular debut of fund manager Sygnia (detailed in our cover story) — is providing a welcome fillip after a tough year of trading for most punters. It is a little strange to see premium priced listings when sentiment for the resources sector is still looking so brittle. It is also interesting to monitor the flow of new listings (outside the property sector) when some of the darlings of the late noughties listings boom are struggling for viability (Ellies, Wearne, Esor, Imbalie) or in limbo (Chemspec, Blue Financial Services).
Perhaps then a little scepticism should also be applied to the new listings.
In theory, new listings often involve insiders with intimate knowledge of a company and its sector selling shares or offering new shares to outsiders who probably lack that in-depth insight.
Company insiders should know when it’s the optimum time to sell or offer new shares — and also when it is the most appropriate time to buy shares back.
Frankly, one might think that fraught local economic prospects mixed with confusing developmental signals from government would not provide the best environment for local companies to tap investors for capital or to offload shares.
Perhaps that’s why so many new listings of late have involved offshore property pitches, or offer hedges against the state’s ineptitude in providing basic services.
But in truth should we really be surprised by the current bout of IPO (initial public offering) fever? For the past three years companies have managed to raise a busload of new capital with rights offers and shares-for-cash placements. This has certainly not been limited to property counters and high growth companies with international ambitions (like Mediclinic, Oceana and Woolworths). Smaller companies have not battled to get fresh capital either — franchise specialist Taste Holdings and small property group Fairvest being the latest.
If there is a surfeit of money sloshing around the JSE and wide-eyed retail investors are determined to back fresh opportunities for high growth, then the rush of new listings is likely to accelerate in 2016.
The chance to “stag” (buying a share in a prelisting offer in the hope of selling at a much higher price on listing) will be enough to attract punters to IPOs, especially with Sygnia, Balwin, Advanced Health and Anchor making such strong market debuts.
The rumour mill suggests more listings in property, private education, alternative energy, specialised technology and financial services as well as a handful of unbundling opportunities from existing listings.
The best reality check on such developments is probably to dig out those old prelisting statements from the 2006 to 2008 listings boom — and compare the rationale for coming to market with the current state of those companies.
This might seem tedious. But hindsight does introduce a sense of realism to proceedings, and highlight how the best-laid plans on paper can quickly get crumpled by over-ambitious endeavours.
The benefit of doing a bit of homework is that investors might uncover survivors from the last listings boom that offer upside potential underpinned by tangible value. Can investors really put a price on an executive team that is streetwise and unlikely ever again to depart from a lean, mean operational approach?
❛❛ In theory, new listings often involve insiders with an intimate knowledge of a company and its sector selling shares