Bank looks for alternatives as IPOs stall

Harry Brumpton

UBS Group is looking at alternatives to new share listings after the lowest amount in more than a decade was raised in Australia and New Zealand last year.

Block trades and cash calls for takeovers are among the areas that could help offset the lull in initial public offerings, Matthew Beggs, the bank’s head of equity capital markets for Australia and New Zealand, told Bloomberg News.

“We’re probably going to see a broadly similar pattern heading into 2024, with the big outstanding question being whether the IPO market will open,” he said.

Equity and rights offerings in Australia and New Zealand amounted to about US$14 billion ($22.4b) in 2023, a long way from the nearly US$41b in 2020 and the lowest since at least 2012, according to data compiled by Bloomberg.

Australia’s biggest IPO last year was the A$402 million ($432m) debut of chemical distributor Redox, accounting for 37 per cent of funds raised through first-time share sales.

“IPO issuance is typically around 15 per cent of all [equity capital markets] issuance,” Beggs said. “In the last couple of years, it’s been less than 5 per cent.”

UBS was top arranger in Australia and New Zealand, including the Redox float and growth equity raisings for classifieds site CAR Group, vintner Treasury Wine Estates and the block trade of lithium miner Pilbara Minerals by Chinese battery producer Contemporary Amperex Technology.

“We are always working across the board, whether it be follow-ons, whether it be blocks, we’re pretty active just balancing our commitment across all of those verticals,” Beggs said.

The outlook for large offerings could improve with positive market momentum and strong corporate earnings from February, potentially leading to new share sales in the first half of the year, according to Beggs.

Airline Virgin Australia Holdings and metals processor Commonwealth Steel, or Molycop, had both planned to list last year but didn’t proceed, while data centre operator Airtrunk also began considering an IPO.